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The Key to Managing Cash in Uncertain Times

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In today's uncertain times, there are several ways you can ensure that your business stays afloat. One of them is by managing your cash effectively. This article outlines several tips to help you do just that.

Collect A/R & Invoice Early for Service Businesses

If you're looking to boost cash flow, you'll want to collect A/R & invoice early. A/R is a crucial part of your business' financial health. It can be easy to overlook or ignore, but there are ways to get more of this vital influx into your balance sheet.

One of the best ways to collect A/R & invoice early is to make sure you're capturing the most relevant data from every customer touchpoint. Using advanced features of your customer portal, you'll be able to streamline the process. Plus, you'll be able to coordinate your customer's information and collect payments.

A/R departments have faced a number of challenges in recent years. However, a shift in mindset is empowering the department to collect more. This includes taking a proactive approach and getting rid of ineffective processes.

There are a number of metrics that can help you determine how your team is performing. For example, if you have a large ART ratio (Average Revenue to Total Accounts Receivable) and a high ADD (Average Days to Collection), you'll be able to get a better sense of your performance.

Another important metric is cost per collection. Although this is a challenging metric to track, the right technology can make it easier to build a reliable, accurate view. Ultimately, a good cost per collection will help you improve your internal operations and enable significant changes in your A/R department.

In addition to this key metric, there are other metrics that can help you optimize your A/R process. These metrics can help you uncover the sources of A/R problems, so you can better focus your efforts.

One important metric is the percentage of current accounts receivable. This measure shows you the relative distribution of your current receivables, which is important for determining how to prioritize your collections.

Combine worst-case cash inflow analysis with worst-case cash outflow analysis

For any business, cash flow management is an essential element to keep the company functioning. It can help a company to make it through an economic downturn. However, companies must be aware of how to do it correctly. Luckily, there are five tips you can use to get started.

First, review your industry trends. In addition, be on the lookout for pending legislation. You may be able to take advantage of tax incentives. This can provide an immediate infusion of cash for many businesses.

Second, be sure to conduct stress tests. These tests can be a great way to identify industry trends. By analyzing a variety of scenarios, you can develop a clearer picture of your odds of success.

Finally, consider a sensitivity analysis. This is a technique that uses a computer program to generate random outcomes. The results will then be entered into a rate of return calculation.

If you use the most accurate forecast possible, you can estimate the rate of return for a series of investments. In turn, you can use the numbers to predict the effect inflation rates have on your cash flow.

As a business owner, you want to get a good return on your investment. In order to do this, you must challenge your assumptions. That means examining your data frequently.

If you do not have the resources to do this, there are reliable systems available to do it for you. A good example is the Paycheck Protection Program. This legislation provides substantial tax advantages for companies that meet their obligations with cash or cash equivalents.

To perform a scenario analysis, you will need to develop three types of scenarios. Each of these should be stress-tested and monitored in real time.

CGMA Scenario Planning Tool

Managing cash in uncertain times requires a comprehensive approach. The CGMA Scenario Planning Tool helps users understand key uncertainties and drivers. It uses Shell's contribution to scenario planning to help evaluate the potential impact of economic conditions. Using a CGMA tool is important for small and medium-sized businesses.

A recent CFO survey found that more than 40 percent of respondents dedicated significant crisis management efforts to scenario-based cash planning. While scenario planning is not a new practice, it has been re-emerging as a useful tool. This is because it allows organizations to quickly respond to changes in the economy. By analyzing how these changes will impact the organization's cash reserves, companies can better manage their cash and prepare for future events.

For organizations that are experiencing revenue uncertainty, scenario-based planning can help them determine the necessary cash reserves and manage the risks of uncertainty. However, a lot of organizations struggle to get forecasting and strategic planning in sync. Often, they rely on longer-term scenarios, rather than the actual performance of the business.

Managing cash in uncertain times can be a daunting task. But it can also be a golden opportunity for finance professionals to improve their forecasting skills. With COVID-19, there is a need to take a hard look at the situation and understand how to improve. 

Finance professionals can learn from this crisis and build on it to become more agile in the future. Getting a head start on the financial forecasting process is one way to prepare for the next pandemic. Fortunately, there are tools available to help make this process easier. These include the CGMA Scenario Planning Tool, as well as the CGMA Treasury and Cash Management Tool.

CGMA Treasury and Cash Management Tool

A new CGMA Treasury and Cash Management Tool aims to help you get the most out of your treasury. It covers all the major treasury activities that management accountants are involved with, including planning, developing, and implementing a capital structure, as well as managing short-term liquid investments, and a host of other operational and accounting treasury-related items under IFRS.

The CGMA tool is not the only resource you should look into for treasury-related information. There's also Treasury and Cash Management Essentials, a CGMA publication designed to give you a better understanding of what's going on in the financial world.

 You'll learn about key practices such as setting up a treasury function, developing a treasury strategy, and leveraging multiple sources of data. It also has a handful of other useful tips for management accountants. For example, it's important to understand your company's key customers and suppliers, which in turn can help you better manage your cash.