19 Financial Experts Discuss Effective Resource Management Practices

For company leaders, managing cash flow and working capital is crucial to ensure that their teams have the necessary resources to drive business growth. Effective management of financial resources enables leaders to meet operational expenses, invest in strategic initiatives and seize growth opportunities.

Below, Forbes Finance Council members share key strategies company leaders can employ to effectively manage their cash flow and working capital. From maintaining a robust cash flow forecasting system and optimizing inventory management to implementing efficient accounts receivable and payable practices, these strategies empower leaders to maintain financial stability and allocate resources strategically.

1. Focus On Sales And Net Profit

Business growth does not occur without cash flow. The number one thing your company needs to focus on consistently is sales and net profit, because that’s ultimately what will allow you to have resources for business growth. Then, find and hire someone who is a CFO, who knows how to properly budget and make smart decisions around where to deploy business capital. – Ryan Carroll, Wealth Assistants

2. Establish Cash Flow Forecast

Company leaders can effectively manage cash flow and working capital to ensure the team has the resources to grow. Establish cash flow forecast, develop working capital management strategy, monitor and track cash flow, optimize inventory and utilize cash discounts and short-term financing. – Nolan Stokes, Stokes Retirement Group Limited

3. Explore Savings Opportunities

To assist with cash flow and working capital, businesses can explore savings opportunities such as unclaimed property and employee retention tax credits. Contingency-based businesses like Bottom Line Concepts can assist in obtaining these at a no-risk basis. This ensures resources for growth. – Shlomo Halberstam, Bottom Line Concepts LLC

4. Create A Detailed Budget

Effective cash flow management involves budget planning, 6-month rolling cash flow projections and scenario analysis with a Plan B. Creating a detailed budget, continuously updating projections and assessing potential risks help company leaders allocate resources, maintain healthy cash flow and ensure their team has the resources to support business growth. – Gina Yuan, Markuan

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5. Make Reactive Adjustments

Managing cash flow should always be viewed as a combination of proactive planning and reactive adjustments. Taking the time to understand what resources your team will need will enable the business to prioritize the resources its team needs. If cash is short, a strategy session on how to generate more cash to pay for specific resources will invigorate the team and get their best ideas and buy-in. – Roy Ferman, Seek Business Capital

6. Use A 13-Week Model

Effective cash management depends on closely observing revenue flows. When using a short-term perspective, such as a 13-week cash flow forecast, you strategize by anticipating weekly cash flows to determine if your outflows are timed to outpace cash inflows. With this model, you can prioritize commitments and reach out to your external partners to request temporarily extended payment terms if needed. – Geanette Rodriguez-Ojeda, GRO Accounting and Tax, LLC

7. Monitor Financial Functions

By building discipline into every aspect of their business and closely monitoring their financial fundamentals, such as cash burn rate, inventory, return on investments and more. Businesses that survive difficult market environments are those that have dedicated resources for maintaining the backend of the business, which ensures the survival of the overall operation. – Lee Henderson, EY

8. Focus In On Your Profit And Loss Statement

While the cost of capital remains high (especially since 2008), we’re seeing more and more scrutiny on how companies spend their money. In particular, smaller companies are being forced to reevaluate their org charts or hiring freezes or wages. All companies, no matter their size, should be dialed into their profit and loss statements more than ever and force themselves to manage these headwinds responsibly. – Robert W. Bache, AmeriLife

9. Stay Up-To-Date On The Lending Environment

Often overlooked in managing working capital is having a good understanding of the current lending environment. The types of loans offered, rates and terms available and qualification requirements fluctuate with the economic environment. Being up-to-date on the lending environment saves time and reduces risk when you are considering debt financing to increase your working capital. – Matthew Bjonerud, Cerebro Capital

10. Establish Financial Reporting Systems

It is essential for company leaders to establish financial reporting systems. Implement the following practices. Understand the fundamental timing of the business’s actual cash outflows for expenditures and cash inflow from sales. Establish financial reporting systems that provide real-time visibility for these outs and ins. Hire staff who are competent in cash management. As necessary, arrange financing to provide cash for operations and projected capital expenditures. Continue to monitor steps one through four. – Bruce Roberts, Carofin LLC

11. Keep Expenses In Line With Positive Cash Flow

Creating a cash flow statement and budget is essential for effective monitoring of both incoming and outgoing cash flow. As incoming cash flow exceeds outgoing cash flow, that positive net cash can be deployed in line with the company’s budget to support business growth expenses. Keeping expenses in line with positive net cash flow positions the company best for financial success going forward. – Greg Bassuk, AXS Investments

12. Negotiate Payments With Suppliers

Effective cash flow and working capital management are crucial for business growth and survival. Tips to manage them include regular monitoring of cash flow available to cover expenses, managing accounts receivable invoicing promptly, negotiating payment terms with suppliers, controlling excess inventory levels and using technology to manage cash flow. – Greg Cucino, Bridgepoint Consulting

13. Maintain Higher Days Payable To Sum Of Days Receivable

Leaders should focus on maintaining higher days payable (i.e., days taken by the company to pay vendors) compared to the sum of days receivable (i.e., days taken to collect cash from sales) and days inventory (i.e., days taken to convert inventory to sales). The higher this difference is, the more cash liquidity there is to fund growth and improve unit economics for a company thereby giving it a competitive edge. – Abhinav Swarup, Zeus Living

14. Track Cash Flow In Real Time

Measure money coming in and going out during a particular time period. Know when clients are paying you and when regular expenses are due. Tracking cash flow ensures you always have an accurate projection of how much extra money you have to invest in growth. Mission-driven small business advisors offer free or low-cost guidance on creating cash flow statements. – Carolina Martinez, CAMEO

15. Tighten Up Account Receivables

With the current high cost of capital, businesses should look for ways to keep customer revenues as the primary driver of growth. Leaders should look at their burn rate relative to revenues and clear up bottlenecks by tightening up account receivables and limiting debt. Software that automates cash flow analysis and management can help. – Sean Cantwell, Volition Capital

16. Compensate Employees Appropriately

Labor creates enormous value for an organization, and it impacts talent, motivation and performance. As such, it is important for company leaders to reflect on how the various ways of paying people can impact financing and operating decisions, reporting issues, morale and productivity, as well as analyze the cash flow implications of different forms of compensation. – Robert Reeder, GlassView

17. Conduct Monthly Budget Reviews

Companies should start the fiscal year by establishing a budget based on the previous year’s profit and loss. Then a monthly review of the projected budget compared to the actual cash flow to determine if you are on track or need to make adjustments to enhance business growth. Doing frequent checks provides leaders with the information to make decisions that can help the company reach its goals. – Letitia Berbaum, The Zandbergen Group

18. Consider Investing Cash To Earn More

Weigh liquidity rather than earning potential. There is no one size fits all solution, but with higher rates, your excess cash can earn more. Consider buying treasuries, as they require monitoring maturities; very short-term bond funds or exchange-traded funds as they have duration risk; and money market funds, which are the most practical. You give up a little yield but have immediate liquidity and no value fluctuation. – John Abusaid, Halbert Hargrove

19. Optimize Expenses and Maintain Cash Reserves

Company leaders can effectively manage their cash flow and working capital by implementing robust financial forecasting and budgeting processes. Regularly monitoring key financial metrics, maintaining a healthy cash reserve and optimizing expenses can ensure that the team has the resources to enhance business growth. – Jared Weitz, United Capital Source Inc.


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