Cash has always been king, but for many U.S. businesses, it's now much more abundant as well. Recent data from S&P Global found that as of mid-2017, American companies now hold onto a record $1.9 trillion in total cash reserves or similarly liquid assets. That means cash and cash equivalents now make up a much larger portion of corporate balance sheets, too: Last year, cash comprised 11.8 percent of U.S. corporate assets, compared to only 7.6 percent 10 years earlier.
Subsequently, more companies are choosing to save in hopes of scoring a major acquisition deal, or making a significant capital investment elsewhere. Either way, cash is still the leading factor for business growth, which means it can also present a serious risk when it is misallocated. CFOs today need to prioritize timely, accurate and highly detailed reporting on cash flow and related metrics if they expect to achieve meaningful growth.
There are many consequences to not having the right information. Here are just a few examples:
1. It may prevent businesses from getting financing.
2. Future assumptions may be thrown off course if information is not accurate.
3. Over calculating profits and under calculating spending can lead to inadvertent overspending.
With many CFOs getting involved in operating metrics – a step beyond the financial metrics they have traditionally used, they need availability of analytical tools and the ability to do “what-if” analyses. That means investing in the technology necessary to support business processes, such as budgeting, forecasting and long-term planning. This planning effort is not only related to financial data, but also to the operational information that drives the business. It starts with defining key business metrics and then tying these metrics to how they affect or drive bottom-line performance.
Measuring CFO confidence
Another report from Duke University's Fuqua School of Business seems to confirm some of these predictions on corporate behavior. Based on a survey of 371 U.S. firms, researchers found access to capital was at the very bottom of executive concerns in 2017. The top worries for CFOs revolved around putting that capital to use through talent, preparing for economic uncertainty and plotting a course for growth.
Unfortunately, CFOs are not finding the time, talent or resources to achieve these goals - 89 percent of finance chiefs said their companies are not taking advantage of cash inflows to increase their net present value. In other words, they aren't able to do the work that actually adds value to the business.
To make the decisions that move the needle, strategic CFOs rely on a combination of advanced technology, talented people who can fully utilize it, and a dose of something much harder to measure: confidence.
Today, business leaders can reach that level of insight thanks to Consero, which drives growth and innovation through their unique “Finance-as-a-Service” model. Modern finance leaders are more sophisticated and demand a higher level of service, powered by smart, on-tap and highly scalable digital technology. Consero mixes back-office accounting and finance functions with access to software and best practice needed to gain clarity and scalability. In the end, this gives CFOs the time and the information they need to realize and take advantage of growth opportunities. Learn more about what Consero can do for your business.