To quote Albert Einstein, “In the middle of difficulty lies opportunity”.

In today’s unpredictable and ever changing business environment, financial uncertainty has become an ever-present challenge for CFOs in South Africa. Both the external and internal factors provide ongoing headwinds. Be it the ability to operate in an environment flooded with supply into the country from the east, tariffs imposed on the country, fluctuating exchange rates, inflation, supply chain disruptions and regulatory changes, the ability to manage financial instability is crucial to both the longevity of the business as well as its ability to be commercial.

That said, holding the course is tough and needs real support and focus. Holding the course requires strategic focus supported by insight and the ability to execute in a practical and meaningful way.

CFOs often grapple with the practical solutions needed to hold the course while effectively implementing sustainable initiatives in an actionable way. This article aims to provide insights and practical examples which may assist in providing thoughts, arming them with the tools needed to confidently navigate and ultimately grow.

Robust Cash Flow Management

It goes without saying that liquidity is crucial in any business. This is even more important in times of uncertainty. An effective cash flow management strategy which ensures sufficient funds are available for operational needs, optimises cash flow, minimises risk, optimises returns and ensure product pricing remains competitive is the aim.

A proactive approach to cash flow management requires that controls are tightened and that terms with suppliers and clients are optimised.

We have found that CFOs and their teams still use dated and back-dated information to manage their cash flow. The environment makes the ability to predict with accuracy tough. There is true value in having a up to date and forward looking view to make decisions in a more informed manner.

Solutions we find are helpful:

• Have a cash flow forecast which is up to date, forward looking and available more regularly. Having insights to headwinds is power and provides the ability to plan, pivot, adjust as needed.
• Consider automated solutions – the technology available to businesses has exploded. Find a partner who will take the time to understand your business, it’s needs and the needs of the decision making team. The time saved will be invaluable, decision making will be based on accurate information and focus will be able to be placed on value adding work.
• Finance shouldn’t be an island. We find that finance teams are often the last to learn of an order being placed. This is even more risky when placed in currency. Work with your buying/procurement team to get a more real time view of the commitments being made, orders being placed and terms agreed with suppliers. Managing currency risk, payment terms and the internal relationships with your procurement team will alleviate time lost and potentially provide a better base with which to provide proactive cash flow management.
• Have a tailored and relevant Foreign Exchange management policy in place. Many business have policies which were compiled using various business principals. They consider propensity for risk and other factors. That said, few are fully implemented and are only used as a guide. They are also rarely reviewed despite changing circumstances. Partner with a specialist who will analyse your business and provide you with a tailored, relevant and performing strategy.

Process and Operational structures to support the business growth aspirations

We find that when starting a relationship with businesses, the processes in place are as a result of how they got here. With some over engineered and some under engineered processes risks are often prevalent, time is wasted and decision making is slowed.

• Partner with a team who bring fresh eyes. Give them the space to audit current processes, audit your current cost base, provide a needs analysis, identify quick wins and suggest potential solutions.

This area is one where we have seen a large need, have managed to provide real support and ultimately improve cash flow. To name just a few levers we have identified and found solutions for:

• Intercompany complexity introduces additional/duplication of compliance costs within the group.
• Assisting in request for proposals: Reduction in insurance cost to business – while retaining appropriate cover with a reputable insurance provider.
• Evaluating investment & finance opportunities & providing financial recommendation.
• Streamlining the flow of information – automated information flow aids in the reduction of costs in the business i.e. Audit cost reduction.

Holding the course can be tricky. CFOs deal with full plates, long priority lists and many external factors. We shared just a few practical ideas we have found to provide solutions. We hope you have found this valuable.

At wauko, we are passionate about business. If this article resonates with you, challenges you or evokes the need for discussion, I would love to hear from you. Jacky Buys on 021 819 7829 or jbuys@wauko.com.