The evolution of the CFO's role in recent years goes beyond focusing on the financial management of the company itself, where, among other more strategic issues, the promotion and establishment of a ‘culture of liquidity’ in the organisation becomes one of the key factors to be achieved by the CFO.
The objective to be achieved goes beyond achieving a cash position at a given point in time, as it involves promotion, internally, of a culture that is geared towards ‘protecting’ sustainable cash generation over time.
So much so, that decision making itself must consider and evaluate how to optimise flows, as well as improve operational and financial costs, so that an appropriate level can be achieved, enabling each organisation to meet the challenges of growth or adaptation.
The principal objective is gaining sufficient flexibility in the company, that it allows them to take advantage of different investment opportunities that can be generated, as well as coping with any crisis.
It is in this sense where the figure of the CFO acquires a relevant role in fostering a liquidity mindset at all levels of the company, ensuring that each area and its managers understand the importance of managing the available resources in the most efficient way possible.
To do this, it must draw on its comprehensive knowledge of the business to identify and understand how the company's main cash flows are generated and project them to the needs of the future.
It is therefore essential that the analysis of flows is aligned with the company's strategy and that it becomes a key element in decision-making, always considering the associated risks and the likelihood of their occurrence, in order to quantify them and mitigate their effects, if necessary.
Analysing the impact of an increase in the price of key inputs, or problems in the supply chain, including a possible crisis at the general level, will allow more informed decisions to be taken and thus preserve a higher level of business solvency over time.
An important aspect of fostering a liquidity culture is to regularly monitor the optimisation of operating costs, distinguishing between those that are ‘mandatory’ to maintain and those that are optional and can be reduced or eliminated.
Investments that allow the company to improve its competitiveness or reduce non-functional operating costs are more advisable than those that compromise cash flow without the ‘certainty’ of generating clear returns in the short or medium term.
Another aspect to consider is still to define when, how and to what level is it advisable to indebt oneself, provided it is functional to the business and the expected profitability parameters are established in advance.
However, the most important thing for the CFO to achieve is that the organisation, or rather the people within it, no matter what level they are at, understand the importance of liquidity and the role it plays in the present and future of the organisation.
This is why effective communication helps to create this kind of culture, where every employee must be aware of the impact of their decisions.
Of course, in this process of change, the role of technology should not be overlooked, as there are different alternatives that allow the CFO to monitor and manage liquidity at all times and to project different scenarios.
In this way, an organisation that prioritises liquidity will be better positioned to seize new opportunities and meet the challenges ahead, while maintaining the ability to borrow if necessary, where the CFO has a lot of value to contribute.
