Cash flow optimization is the lifeblood of any growing enterprise. In this guide, we explore actionable strategies that leading CFOs deploy to ensure liquidity remains robust, even during market volatility.
1. Accelerate Receivables
Reducing your Days Sales Outstanding (DSO) is the fastest way to unlock cash. According to research from the Institute of Chartered Accountants in England and Wales (ICAEW), businesses that actively manage their receivables see a 15-20% improvement in working capital efficiency.
- Automated invoicing triggers upon project milestones
- Early payment discounts (e.g., 2% 10, Net 30)
- Strict credit checks for new clients using credit reference agencies
- Electronic invoicing to reduce processing time by 50%
- Regular debtor reviews and aged debt analysis
2. Optimize Payables Without Damaging Relationships
While you want to get paid fast, you should strategically manage your outflows. The key is balancing cash retention with supplier relationships. HMRC provides guidance on payment practices that businesses should follow to maintain compliance and good standing.
- Negotiate 60-90 day payment terms with established suppliers
- Use purchase cards for small transactions to extend float
- Schedule payments to align with cash inflows
- Take advantage of early payment discounts only when cash-positive
- Maintain transparent communication with vendors about payment schedules
3. Forecast with Precision
A 13-week rolling cash flow forecast is the gold standard for financial planning. This approach allows you to anticipate shortfalls and take corrective action before they become critical.
4. Leverage Technology
Modern treasury management systems can automate cash positioning, provide real-time visibility, and integrate with your ERP for seamless reconciliation.