How the CFO can optimize the company’s cash flow

Chief Financial Officers (CFO) are playing an increasingly decisive role in companies, which goes beyond cash flow management.
According to a survey conducted by Grant Thornton LLP, 40% of the CFOs state that strategic planning is one of their top priorities – together with their customary tasks, like increasing cash flow or reducing costs.

The survey also showed that managing risk is a responsibility of the CFO: Two-thirds of those interviewed said that they seek to align their risk management strategies with their business strategy.

From the many duties of CFOs, we have chosen to address one of the most important and recent, viz.: financial risk management. Under this topic, one of the most relevant and vulnerable assets in the balance sheet is the Accounts Receivable from clients.

Accounts Receivable from clients generally represent 30% or 40% of total assets, and therefore this item is very much exposed to the mood of the economy. During recent crises, we witnessed numerous companies going bankrupt or filing for judicial reorganization, which seriously affected their cash flow. What really leads a company to bankruptcy is not a negative result in its income statement, but rather the lack of cash.

In view of the foregoing, CFOs are seeking to solve the problem through protection measures for their Accounts Receivable portfolio. One of them – in the growing phase – is Credit Insurance.

How many companies in recent years would probably not have gone bankrupt or filed for judicial reorganization had their receivables portfolio been insured?

Through the placement of Credit Insurance, the CFO in addition to protecting the company’s cash assets, also exercises strategic risk management, directed to value, and with the objective of conducting more and more transactions with protection.

CFOs can implement other measures to protect their company’s cash flow, however, many have a very high cost and involve considerable bureaucracy. Credit Insurance not only has a palatable cost, but also helps companies to safely meet their sales targets.

Therefore, today’s CFOs have the capacity and tools to anticipate external threats, they just have to apply them.
Learn more about this and other benefits of Credit Insurance from our Definitive Guide on Credit Insurance: