Cash Conservation: Reactionary + Precautionary

At ONE Pacific, our NetSuite consultants are happy to discuss how to turn your data into assets of business intelligence.

Enterprise CFOs are in an interesting position. More than half, 55%, of finance respondents to Brainyard’s Finance Priorities Survey say their teams’ influence has grown since the start of the pandemic. CFOs are being called on to combine executive-level strategic vision with surgical precision around cash flow analysis to make spending cuts while protecting growth investments. Many, though, are pressing pause as they consider a new round of stabilizing actions.

Shifted revenue forecasting models

Operating CFO Ty Stewart controls FP&A matters for his firm, Simple Life Insure, which aggregates quotes from 10 top insurers. When a pandemic-driven economic downturn looked inevitable, Stewart took 3 steps, some reactionary, some precautionary for his insurance business: First, he shifted revenue forecasting models. “Past earnings models based on ‘business as usual’ won’t cut it, since business as usual allowed for in-person meetings and exchanges,” says Stewart, who is also president and CEO. “This was admittedly difficult and murky, but it had to be addressed.”                    

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Reduced budgets for various operating areas

Then, he reduced budgets for various operating areas. “We’re tightening the belt on everything from travel reimbursements, when those finally re-enter the picture, to office supply orders to even reviewing subscription fees and costs for outsourced services,” Stewart says. Pointing to the latter three, he says many of these fees can be renegotiated: “It’s always worth a shot.”

Next, he created more frequent, granular communications with investors, upper management and constituents regarding finances.

“Everyone feels tense,” says Stewart, who admits that creating precise revenue forecasts and expense projections, or even offering much good news to team members, is difficult right now. “Keeping channels of information open, transparent and frequent at least bolsters trust in an incredibly uncertain time.”

Recognizing that new spending cuts can trigger morale dips, Stewart says CFOs should focus on balancing reductions with moves that preserve their companies’ growth — and make sure that message gets out.

Did you know improve your accounts receivable turnover ratio helps cash conversion cycle? How?

  1. Invoice regularly and accurately. If invoices don’t go out on time, money will not come in on time.
  2. Always state payment terms. You can’t enforce policies that you haven’t communicated to clients. If you make changes, call them out.
  3. Offer multiple ways to pay. New B2B options are coming online. Have you considered a payment gateway?
  4. Set follow-up reminders. Don’t wait until customers are in arrears to start collection procedures. Be proactive, but not annoying, with reminders.
  5. Consider offering discounts for cash and prepayments. Cash(less) is king in retail, and you can reduce AR costs by encouraging customers to pay ahead rather than on your normal customer credit terms.

Liquidity and Cash Conservation

As a part-time CFO for several businesses, Nan Kreamer, managing director at Newpoint Advisors Corp., is emphasizing liquidity and cash conservation. Kreamer is scrutinizing discretionary spending for return on investment (ROI), all with an eye to managing expenses. She’s using

  • a 13-week cash flow model,
  • a rolling 12-month business forecast and
  • regular assessments of key performance indicators

to help her client companies achieve that goal.

Kreamer’s recommended ace in the hole is the cash flow model, which addresses critical points like:

  • How much cash do we have on hand?
  • Is this enough to get us through the next 13 weeks?
  • If not, how can we obtain additional cash quickly, say via a PPP, SBA EIDL loan, new line of credit or accounts receivable factoring?
  • What do our accounts receivables look like over the next 13 weeks?
  • Are we looking at 30-, 60- or 90-day terms on sales, or is our AR turnover ratio healthy, as in the case of B2C e-commerce sales?
  • What are our financial obligations? Which vendors need to be paid on time in order to keep the business running, and where might we cut back for the time being? Think requesting rent reductions, eliminating travel and further reducing unnecessary recurring expenses.
  • Kreamer cautions CFOs to not confuse cash flow models with profit-and-loss (P&L) statements.

Line by line Cash Tracking

“Cash models factor in what’s coming in and out of your bank account,” she says. By tracking that cash flow — versus just looking at sales and revenues — companies can identify potential financial disruptions and either plan for them or take corrective action.

Kreamer says CFOs should also continue tracking and reviewing KPIs on a weekly basis. Some critical metrics include the number of sales calls you need to make per week to reach current sales goals, current inventory turns and current days sales outstanding. “Constantly measuring your metrics helps you understand where you are right now, where you should be and how you can improve,” says Kreamer.

Conserve Chart

Work with line-of-business management to assess the risk of each reduction and potential business impacts. Then, get aligned on how to proceed.

“Spending cuts can be difficult when top management doesn’t agree on them,” Kreamer says. “The CFO is in the position to say, ‘Okay everyone, here’s the pot of money we have to work with right now. How are we going to use it?’”

Look Ahead with Transparency

Most seasoned CFOs have been through at least one recession, but the combination of a generational event like COVID-19 plus an economic downturn has put even experienced CFOs in uncharted territory.

Michael Rothe, president and CEO at Canadian Finance & Leasing Association, says the current situation calls for as much transparency as possible about the organization’s financials, pain points and agenda.

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CFLA also dusted off its strategic plan and reviewed it line-by-line to determine how it could conserve some cash and where it could get additional liquidity that it needed to weather the storm. Some options were taken off the table immediately, including the potential sale of some of the organization’s financial investments.

“We don’t want to sell the investments when the market’s tanking just because we were desperate for cash,” says Rothe. “We [also] don’t want to barely make it out and then find that we failed just before the finish line. So in some ways, we’re also spending our way through the crisis.”


Granularity, transparency and flexibility of your financial data readiness serve as the fundamentals for your reactive or precautionary cash conversation plan and strategic management decision making. At ONE Pacific, our NetSuite consultants are happy to discuss how to turn your data into assets of business intelligence.