Cash management in the age of inflation
Continuous monitoring and analysis
The core business of the Corporate Treasurer has not changed much over the past decades. His/her role is still to ensure that there is sufficient cash available to support the company that employs him/her. And this, regardless of the market conditions of which he/she is supposed to manage all movements and fluctuations.
What has changed, however, and is changing all the time, is the economic situation. The current state of the world, marked by social, economic, and climatic insecurity, requires financial professionals to be intelligent, adaptable, and equipped with tools specifically designed for their role.
We are indeed going through a period of inflation, which of course has consequences on our behavior and our individual spending. But these difficulties also have repercussions on the behavior of companies, whose survival depends on their ability to overcome these difficulties and to continue to develop in increasingly competitive markets.
The danger of gradually increasing rates
Inflation is the rate at which the general price level of goods and services increases and, as a result, the purchasing power of money decreases. For companies, this means that their investment capabilities must be closely examined and carefully considered to avoid major setbacks.
Similarly, businesses, especially SMEs, need to keep a close eye on cash inflows and outflows. They need to ensure that their creditors and debtors are also subject to strict rules, the non-compliance of which will affect their contractual transactions.
Because in times of inflation, a company’s overdraft will cost them significantly more, while interest rates do not increase proportionately. What can they borrow? And from which institutions? On what terms? What will they want to invest or hold on to simply to survive? These are some of the most difficult issues to resolve in a global market crisis. Especially when a company cannot – as is systematically the case – do without components that are essential to the continuity of its activities (energy resources, for example).
Make the right choice!
Regardless of the economic climate or the predictions of analyst firms such as IDC, which in a recent study pointed out that inflation will weigh on IT budgets in 2023, having an accurate view of available corporate cash remains a priority.
Most financial analysis professionals have abandoned spreadsheets because of the limited capabilities of these tools. But not all treasurers are yet well equipped, even though there are powerful, intelligent, and inexpensive solutions on the market. Solutions that offer an almost immediate ROI and a series of functionalities dedicated to very high-level forecasts for very fine analysis of financial availability.
Investing in technological tool is not an easy choice. But when the chosen solution is able to support tasks as valuable as the management of a company’s cash, to anticipate, alert and propose scenarios to avoid seeing its financial costs increase and thus reduce the company’s margin, it is no longer time to hesitate.