Cash Flow Optimization

The C.A.S.H Framework How do you improve CASH? Follow my framework: C - Collections Efficiency Quickly collecting receivables allows for immediate use of funds in operations, investments, or debt payment. How? • Implement an automated invoicing system. • Systematically follow up overdue payments. • Encourage shorter payment terms or early payments. A - Accurate Forecasting Forecasting helps anticipate liquidity needs and prepares you for situations that could strain cash reserves. How? • Use financial forecasting software. • Regularly adjust forecasts based on actuals. • Collaborate with sales, operations, and procurement for their insights. S - Streamlined Expenses Optimizing operational costs increases the available cash in your business. How? • Regularly audit expenses to identify inefficiencies. • Negotiate better rates or terms with suppliers. • Use cost-saving technologies or automation. H - Healthy Investment Wise investments contribute to future cash flow, and efficient inventory management frees tied-up cash. How? • Develop a process for evaluating investments. • Use just-in-time inventory management. • Regularly review and dispose of underperforming assets. 👉 Which framework or tactics do you use to improve your Cash? Save this post for later and share it around ;)

Most CEOs focus on the P&L. That's a mistake. Because profit doesn’t scale companies—cash flow does. ➡️ Learn to analyze a cash flow statement in 10 steps and never miss a red flag again: https://lnkd.in/e2JXiUK6 Let’s break it down. A company can show a healthy profit on paper Yet still fail to: ↳ Scale sustainably ↳ Attract growth capital ↳ Maximize enterprise value Why? Because they’re optimizing for earnings… Not for liquidity, flexibility, or long-term value creation. Here’s what happens when you operate without a cash flow strategy: ✕ You chase top-line growth without discipline ✕ You burn capital on low-yield projects ✕ You carry expensive debt and weaken optionality ✕ You miss strategic windows to raise capital or reinvest Here’s how to fix it: 1. Master your Operating Activities This is your real-time cash engine. ✓ Tighten your cash conversion cycle ✓ Forecast working capital needs accurately ✓ Build resilience through scenario planning 2. Get strategic with Investing Activities Growth isn’t random—it’s funded. ✓ Use NPV and IRR to prioritize high-impact projects ✓ Focus on investments that compound operating cash flow 3. Be intentional with Financing Activities Capital structure is a choice, not a consequence. ✓ Align debt/equity with risk and return expectations ✓ Set clear dividend and repurchase strategies Takeaway: Profit is a snapshot. Cash flow is a strategy. And only one of them drives long-term value creation. 📌 Want to master this and more and make 2025 your best year yet? ▷▷ Apply for the Spring cohort of The CEO Financial Intelligence Program. Limited spots, starts April 23: https://bit.ly/3ZCI0kr ▷▷ Register for a free upcoming Financial Intelligence Masterclass to learn more: https://lnkd.in/ertXF5pi ♻️ Like, Comment, Repost if this was helpful. And follow Oana Labes, MBA, CPA for more insights on financial leadership.

Master your Cash Flows It’s all about the cash money 🤑 but there are countless metrics to measure it. Which metric is the best one to use? That depends a lot on your business and a number of other factors Let’s do a deep dive on a number of metrics to give you a grip on your cash: 1. Operating Cash Flow (OCF):       • Formula: OCF = Net Income + Depreciation + Amortization + Other Non-Cash Items - Changes in Working Capital       • Essence: Gauges the cash generated or used by a company in its core business operations.       • Reading the Numbers: More operating cash flow means better liquidity for day-to-day operations, investments, and paying off debts.     2. Free Cash Flow (FCF):       • Formula: FCF = Operating Cash Flow - Capital Expenditures       • Essence: Tracks cash that's available for distribution to stakeholders or for reinvestment.       • Reading the Numbers: Positive FCF shows a firm's ability to generate cash and fund expansions, pay dividends, or lower liabilities.     3. Cash Conversion Cycle (CCC):       • Formula: CCC = Days of Inventory Outstanding + Days of Sales Outstanding - Days of Payables Outstanding       • Essence: Calculates the time taken to turn investments in inventory and receivables into cash, less the time to pay off suppliers.       • Reading the Numbers: A shorter CCC implies effective working capital management and sufficient cash for meeting obligations and growth.     4. Net Cash Flow Formula:       • Formula: Net Cash Flow = Operating Cash Flow + Investing Cash Flow + Financing Cash Flow       • Essence: Represents total cash inflows and outflows from operating, investing, and financing activities.       • Reading the Numbers: Positive net cash flow means a firm is generating more cash than it's spending.     5. Discounted Cash Flow (DCF) Formula:       • Formula: DCF = CF1 / (1+r)1 + CF2 / (1+r)2 + ... + CFn / (1+r)n       • Essence: Valuates an investment or a company by projecting its future cash flows to the present.       • Reading the Numbers: Higher DCF suggests greater future cash generation and increased value.     6. Present Value Formula:       • Formula: PV = CF / (1+r)t       • Essence: Determines today's worth of a future cash flow.       • Reading the Numbers: A greater present value indicates a more valuable future cash flow.    === There are even more cash formulas than the ones listed above, but I’m limited to only 3k characters. Which ones would you add? Let us know by joining in on the discussion in the comments below 👇

MASTERING ACCOUNTS PAYABLE: A KEY TO FINANCIAL EFFICIENCY💡 Accounts payable (AP) is more than just paying bills it's about managing cash flow, maintaining vendor relationships, and ensuring financial accuracy. But what does this look like in real life? Let’s break it down with examples! 1. Invoice Accuracy Matters! Imagine your company orders office supplies worth $5,000. The invoice arrives, but the amount is $5,500. Without proper verification, this could lead to overpayment. A strong AP process ensures invoices are checked against purchase orders and delivery receipts before approval. 2. Vendor Relationships Build Trust A manufacturing company relies on a key supplier for raw materials. By keeping vendor details updated and ensuring timely payments, the company maintains a good relationship, leading to priority deliveries and potential discounts. 3. Payment Terms Can Save Cash A retail business negotiates a 2/10, net 30 payment term with its supplier meaning if they pay within 10 days, they get a 2% discount. By managing AP efficiently, they save thousands annually in early payment discounts! 4. Approval Workflows Prevent Fraud A company receives a suspicious invoice from an unknown vendor. Instead of processing it immediately, their AP workflow requires manager approval for new vendors. Upon review, they realize it’s a fraudulent invoice saving the company from a financial scam. 5. Efficient Payment Processing Keeps Operations Smooth A tech startup ensures its software subscriptions and office rent are paid on time through automated AP processes. This prevents service disruptions and allows the finance team to focus on strategic growth rather than chasing due payments. Final Thought A well structured accounts payable system is not just about processing payments it’s about financial control, risk management, and strategic planning. How does your organization manage AP? Any challenges or success stories to share? Let’s discuss in the comments! #AccountsPayable #Finance #BusinessGrowth #CashFlowManagement #VendorRelations #InnocentTax #InnocentAccountant #InnocentMotivated #InnocentLinkedin

Navigating Maturity Spikes: A Strategic Approach to Liquidity Management Managing maturity spikes in funding is a critical aspect of effective liquidity management for banks. Such spikes occur when a significant volume of liabilities or funding sources are due for renewal or repayment at the same time, potentially leading to liquidity strain if not managed appropriately. Understanding and strategically addressing these maturity concentrations is essential for maintaining financial stability and ensuring ongoing operational resilience. The first step in managing maturity spikes involves accurate forecasting and monitoring. Banks must have robust systems in place to predict cash flow needs and identify potential maturity concentrations in advance. This foresight allows for the development of contingency plans to address potential liquidity shortfalls, ensuring that the bank remains prepared for various scenarios. Diversification of funding sources plays a crucial role in mitigating the risks associated with maturity spikes. By spreading funding sources across a variety of maturities and types, banks can reduce their reliance on any single source of funding, thereby enhancing their liquidity profile. This strategy involves a mix of short-term and long-term funding, as well as considering a variety of instruments such as deposits, bonds, and other borrowings. Active management of assets is another key strategy. Banks can improve their liquidity position by maintaining a portfolio of high-quality liquid assets (HQLA) that can be quickly converted into cash without significant loss. This portfolio acts as a buffer during periods of stress, providing the bank with additional flexibility to meet its liquidity needs. Moreover, engaging in proactive dialogue with stakeholders, including investors, depositors, and regulators, is advantageous. Transparent communication about the bank’s liquidity management strategies and stability can bolster confidence among stakeholders, potentially easing the pressure during maturity spikes. Finally, stress testing and scenario analysis are indispensable tools in the arsenal of liquidity management. By simulating various adverse conditions, including severe maturity spikes, banks can assess the robustness of their liquidity positions and adjust their strategies accordingly. This proactive approach ensures that banks are not only prepared for normal market conditions but are also resilient in the face of financial stress. In essence, managing maturity spikes in funding is a multifaceted challenge that requires a strategic and proactive approach. Through accurate forecasting, diversification of funding sources, active asset management, effective stakeholder communication, and rigorous stress testing, banks can navigate these challenges successfully. By prioritising liquidity management, banks can ensure their long-term stability and continue to serve their customers and communities effectively.

𝟭𝟬 𝗖𝗮𝘀𝗵 𝗠𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁 𝗞𝗣𝗜𝘀. Cash is King, as they say, but how do you know if you're managing it successfully? You do that by implementing these ten KPIs. ---------- 1/ CASH CONVERSION CYCLE The CCC measures the time it takes for cash to flow through the organization. A shorter CCC indicates more efficient cash management and better liquidity. Track the CCC over time and compare it to industry benchmarks for performance evaluation. 2/ FORECAST ACCURACY Measure the accuracy of cash flow forecasts by comparing projected cash flows to actual cash flows. This KPI assesses the organization's ability to accurately predict cash inflows and outflows, helping identify areas of improvement. 3/ ADEQUACY Assess the adequacy of available cash to meet short-term obligations and maintain sufficient liquidity. This KPI compares the organization's cash position against its short-term liabilities, ensuring that there is enough cash on hand. 4/ CASH TO CURRENT LIABILITIES RATIO This ratio measures the organization's ability to meet its short-term obligations using available cash. It compares the total cash balance to the current liabilities, providing an indication of the organization's liquidity strength. 5/ DSO DSO measures the average number of days it takes to collect payment from customers after a sale. A lower DSO indicates faster cash conversion and improved cash flow. Track DSO regularly to identify trends and implement improvements. 6/ DPO DPO measures the average number of days it takes to pay suppliers after receiving an invoice. Extending the DPO can improve cash flow by maximizing the time to pay bills. It should be balanced though with keeping good vendor relationships. 7/ BURN RATE The cash burn rate measures the rate at which the organization consumes its cash reserves. This KPI is particularly relevant for start-ups and rapid-growth organizations. Monitoring the cash burn rate helps ensure that cash reserves are sufficient. 8/ MARGIN Cash flow margin measures the percentage of revenue that converts into cash flow. It indicates the organization's ability to generate cash from its core operations. A higher cash flow margin indicates better cash generation and management. 9/ CFROI CFROI measures the return generated on the cash invested in the business. It compares the cash flow generated by the business to the amount of cash invested. A higher CFROI indicates better utilization of cash resources. 10/ LIQUIDITY RATIOS Various liquidity ratios, such as the current ratio and the quick ratio, provide insights into the organization's ability to meet short-term obligations. These ratios assess the adequacy of liquid assets available to cover current liabilities. ---------- How are you managing your cash flows? Any KPIs you'd add that you find more important than those listed? #finance #cashflow #cfo #accountingandaccountants #financemaster

A most overlooked opportunity in cash flow forecasting? Modeling how we pay and not just what we owe. Here's why it's not good enough to just plug numbers. In this example, I have a forecast of material costs and non-material costs. I forecast the payments of these costs according to vendor terms. However, what happens when a company has cash flow problems? They're going to need to actively manage who gets paid what and when. In this model, there’s a holdback mechanism that pauses payments in full: 80% of the outstanding costs get paid on time while 20% of payments against new costs are delayed. It may seem harmless at first. But then… The unpaid balance slowly grows and then it balloons into millions outstanding. A vendor calls. Then another and another. They want their money. What's the solution? (a) communicate with vendors and agree to a plan that works (b) slow pay the holdback balance gradually (33% each week) (c) allow the balance build until there's enough cash to catch up in full (d) finance payments with revolving credit (e) ignore it, hope and pray What's powerful about a model like this one is it isn't just about the formulas. It's about the visibility. You get to ask "what if" and quantify the impact of each and every cash flow related decision. That’s what active working capital management is about. Financial modeling is never about plugging in numbers. It's about knowing the options before there's a crisis. Cash flow models should do exactly that.

Most people talking about AI in treasury are skipping the first step: figuring out where you actually are. We’ve spoken to hundreds of treasurers. Many are interested in AI. Fewer know where to start. The truth? The best AI solution for your team depends entirely on your maturity level. At Your Treasury, we use a simple framework—our Treasury Maturity Triangle—to tailor the right AI-enabled next step for your team. Here’s what that looks like in practice: 🔻 Level 1 – Reactive Treasury You’re still manually collating data, reconciling in Excel, and chasing reports. ✅ We use LLMs to rapidly map and clean data, so you spend less time wrangling and more time analysing. (A two-day task becomes 20 minutes.) 🔸 Level 2 – Controlled Treasury You’ve automated some processes, but classification and reporting are still time-consuming. ✅ AI helps you auto-classify transactions, detect inconsistencies, and eliminate errors before they escalate. 🔸 Level 3 – Proactive Treasury You’ve got connected systems and standardised processes. ✅ Time to layer intelligence: trend detection, risk flagging, and behavioural insights become your new edge. 🔸 Level 4 – Intelligent Treasury You’ve embedded policies into processes and built in controls. ✅ Now we use AI to dynamically flex within policy—adjusting hedge timing, liquidity buffers, or funding plans as market conditions shift. 🔺 Level 5 – Strategic Treasury You’re advising the C-suite with real-time insights. ✅ With the right models, AI can model the impact of market events in seconds, inform board-level decisions, and become your strategic co-pilot. This isn’t theory—we’ve helped teams move up the triangle, one level at a time, using Python and AI to free up time and sharpen decision-making. The mistake? Trying to jump to Level 5 without sorting Level 2. These teams often never get started as they realise the jump is too big and they don't have time. The opportunity? Start with the right step for your maturity, and use AI to unlock time and insight at every stage. 📩 Not sure where you sit? Drop us a message. We’ll walk you through it, no jargon, no pressure. #TreasuryTransformation #AIinTreasury #PythonForFinance #CashVisibility #StrategicTreasury #YourTreasury #TreasuryMaturity #FinanceLeadership PS looking forward to meeting some of you at the World Finance Forum in London tomorrow. Tickets for the EACT workshop are still available - contact Sam Clarke at TMI (sam@tmi.co).

Contrary to what you might think, the most important thing about my cash flow forecast isn't accuracy. It's conservatism. As modelers, it's only natural to obsess over perfection. Accuracy. We want our models to be right because they're the playbook for the business. Sadly, no amount of XLOOKUPs or Dynamic Arrays can help us predict the future. The future, by its very nature, is uncertain. A better approach is to build in buffer. Downside. Uncertainty. You don't hear businesses talk much about unexpected cash windfalls. It's always the other way around: Shortfalls. A customer didn't pay on time. A project got pushed back. An expected bid went to a competitor. But, our costs (for the most part) are fixed. Those are due no matter what. So when you're building your cash model, I would propose building everything with a conservative assumption: - Collections come in later than expected - Expenses go out earlier than expected - All collections are given a [30%] haircut (you pick a number) - A "cushion" line for what else could go wrong (maybe another 10% of all activity) Because what's the true, actual goal here? To sleep at night. We create companies that hopefully generate enough margin to pay people for their work (and theoretically make a net profit too). So forecast everything conservatively. Then look at the big picture. The pain points. Build a plan for the downside. In the end, the true power of a conservative cash flow forecast lies in its ability to help us navigate uncertainties with confidence. By contemplating the unexpected, we're building a foundation for a resilient, sustainable business, and maybe (just maybe), getting a little sleep at night. 𝙏𝙝𝙞𝙨 𝙢𝙞𝙜𝙝𝙩 𝙝𝙚𝙡𝙥... Grab my "Doomsday Cash Runway Template" to help get you started → https://bit.ly/48TUsP8

I once helped my friend save ₹13k+ with last-moment tax planning Last year, on 31 July evening (the due date of tax filing, just when the website like the taxpayers goes into panic!), a friend of mine sent me all her bank statements and asked for help with taxes– considering that she couldn’t make any investments to claim deductions under 80C or claim benefit of any other section, since the year already ended in March. Her Net Taxable Income, after all possible deductions, was ₹503,000/-. After doing the math, her yearly liability (under the old regime) came up to ₹13,624 with no relief under 87A (you can do this on websites like incometaxindia.gov.in) Here’s what I suggested: Mediclaim. Section 80D includes a ₹5,000 deduction for any expenses paid for preventative health check-ups for yourself, your spouse, dependent children, or parents. Within the law, if we claim ₹4000 under 80D, with Net Taxable Income reduced to ₹499,000/- —her tax liability would be reduced to zero. Where she had to play ₹13k+ as a liability earlier, she now had to pay NOTHING. And we did that with last-minute tax planning. Points to note: ✅ Reduce tax liability: It’s the key to unlocking deductions, credits, and exemptions that significantly slash your tax liability. So, other than saving money, you also maximize your financial resources— putting YOU in control. ✅ Increase cash flow: Reducing your tax liability creates a ripple effect which ends up freeing up your cash flow. This gives you the luxury of having more funds at your disposal.   Think—reinvesting in your business, paying off debts, and building a financial cushion for the future. Or even enough to take that long pending holiday! ✅ Avoid penalties and interest: Late tax payments can lead to hefty penalties and interest charges that add up fast. Don't let that happen!! (EVER) A well-thought-out tax planning strategy ensures you file your returns on time and pay the correct amount— basically saving you from unnecessary financial burdens. And most of all— consider future tax obligations like retirement, estate planning, and succession planning! PS: Spending on preventive health check-ups saves us from many potential health hazards and prevents financial burdens. #taxes #strategy #taxplanning