Smart Steps to Maximize Your Cash Position During COVID-19 - And Beyond

The mission of CFOs and business owners sounds straightforward: effectively and efficiently optimize the financial performance of the organization. But with the unexpected financial challenges around the coronavirus downturn, accomplishing that mission can be anything but simple.

Only insightful and resourceful leaders can integrate the most current technical expertise with a COO-like knowledge of operations. With their well-honed skills, they turn strategy into execution to succeed. Operating efficiently is a must, so bringing the expertise of your banker and management team to bear on your behalf is essential. These partners can analyze your cash flow and optimize your organization’s financial performance.

Minimize Common Cash-Flow Challenges with Automation

Automation creates accuracy and efficiency when it comes to cash flow. Consider taking advantage of automation by using:

  • Lockbox service for handling customer payments. All payments go to a post office box, and your bank handles all payment processing, tracking and records.
  • ACH origination to accept or make payments electronically, eliminating checks, cash and credit cards along with the inefficiencies that go with them. Consider moving your paper-intensive payroll process to electronic to save you both time and money. Shift your existing payroll cycle from biweekly to bimonthly to eliminate the need for a third payroll issuance two times per year. 
  • Remote deposit to scan and deposit checks with your bank, increasing speed and efficiency.

Payables and Receivables: Time and Your Cash Flow

The basic idea is simple: Receive payments as quickly as possible and pay bills as slowly as allowable to help maximize cash flow. With this in mind, consider:

  • Using purchasing cards (or credit cards) to pay suppliers today, while not being required to pay your bank for a month or more.
  • Securing a line of credit which can create float time to help deal with extended payment terms or long ordering/delivery cycles.
  • Expanding your customer base to avoid becoming overly dependent upon one customer whose extended payment terms can create a cash-flow issue.
  • Changing your pricing model to “reward” customers who pay invoices in a shorter term than if they had chosen an extended term for payment.
  • Negotiating with suppliers and clients who may agree to extended terms that could help stabilize your cash flow.

Fraud: The 800-Pound Gorilla

A study by the Association of Certified Fraud Examiners estimates a typical organization loses a median of 5% of annual revenues to fraud. At worst, such a loss could put many companies out of business, or at least severely damage their cash position and impair their ability to operate. Fortunately, tools and tactics capable of shutting down fraud have been developed, including:

  • Payee Positive Pay, a service that compares check information to that of previous checks from the same issuer. Any information that is suspect results in the check being flagged and requiring approval.
  • ACH Positive Pay tools which only approve transfers involving pre-approved vendors.
  • Dual authorization procedures which require at least two people to review and approve certain transactions.
  • Integrated payables that bundle all of your payments into a single file sent to your bank, which then automatically makes payments based on each vendor's preferred method (ACH, check, etc.).
  • Automated payables which originate invoice review and processing, then submission to the proper departments for payment approval.
  • Designating one computer to access bank accounts, limiting the ability of hackers to access online banking credentials.

For more tips on further boosting your cash position, download our Best Practices article, “Smart Steps to Boost Your Cash Position.”