Strategic Liquidity Management: How CFOs Navigate Payment Delays and Cost Control
In a world fraught with financial uncertainties, finance departments face the dual challenge of securing liquidity and controlling costs. Shari Spadola, Account Executive at Aryza, engages daily with CFOs and finance leaders about their current challenges. In this interview, she reveals how corporate executives can ensure cost efficiency and liquidity.
Delayed payments complicate financial and budget planning. How can a CFO ensure more clarity about payment receipts?
Shari Spadola What I observe with most clients is that a precise risk management system has already been implemented for both new and existing customers to minimize payment defaults or delays. Additionally, receivables are managed independently either through SAP or other receivables management software and/or are additionally handled through collection agencies. Nevertheless, payments are still delayed or even defaulted.
What is the reason for this?
Shari Spadola Most companies lack a precise analysis of how future receivables will develop. If I, as a CFO, know this information in advance, I can plan much better and take appropriate measures early on. The background for inaccurate forecasts about receivables, cash flows, and payment behavior is often a lack of real-time visibility. This gap is often found in large corporations with multiple subsidiaries and many system breaks. Forecasting is not precise because data, reports, and statistics differ in source, structure, content, and format. This leads to inaccurate reports when information is merged, and it can therefore be challenging to create a consolidated real-time view. Another factor leading to inaccurate forecasts is outsourced business processes to collection companies. Here, too, the real-time view is missing. In most cases, there is a lack of automation technology to ensure precise reports.
What problems does this lead to?
Shari Spadola If planning is inaccurate, it will require adjustments later on, which I turn affects the actual cash flow. If the finance department has to manually search for errors, it impairs efficiency and causes additional workload. Financial planning and budgeting are also made more difficult. Financial uncertainty in the company leads to conservative decisions, where innovative projects or expansion plans are postponed to minimize the risk of further financial burdens.
So, is it about fixing problems instead of planning ahead?
Shari Spadola Exactly, instead of making long-term strategic decisions, management tends to focus on short-term solutions to tackle acute financial problems during liquidity bottlenecks. This results in suboptimal decisions and inefficient operations. Financial bottlenecks also lead to strategic decisions being postponed or diluted. The consequences are cuts in the budget for research and development, which weakens the company’s ability to innovate and compete in the long run. As a result, companies miss attractive growth opportunities because they do not have the necessary funds to expand into new markets or finance innovative projects.
What opportunities does Aryza offer to enable CFOs to create more precise financial planning?
Shari Spadola We enable CFOs to automate precise financial planning. To do this, we analyze the efficiency of collections, derive meaningful insights and consequently predict future developments, and forecast how new receivables will impact the business. This allows CFOs to discover costs they were previously unaware of and to manage outsourced processes in ways that were not possible before.