In today’s volatile market and rapidly changing world, businesses need to think more strategically than ever about their cash flow planning. The macroeconomic climate is uncertain with fluctuating exchange rates, interest rate shifts and global trade challenges meaning that conditions for companies can change overnight. Managing a company’s finances is therefore more complex than before, whether you are part of a finance team, a CFO or an entrepreneur.
This is why it is more important than ever not to simply be reactive regarding your cash flow, but to act proactively and strategically. Here, we provide answers on how to approach this alongside Juni’s Head of Treasury, Harald Agering. We also get a customer perspective from Cajsa Horn, CEO and co-founder of Common Clouds. The question then is: how do you actually define strategic cash flow planning?
“If I were to define it at a high level, it’s about asking the question: what could happen? Looking at your cash flow and identifying bottlenecks is a good start, but you also have to dare to think ahead. It doesn’t have to be rocket science; it can be about identifying a key driver, such as an exchange rate, and considering how it might affect cash flow moving forward. Fundamentally, it is scenario planning,” says Harald.
Cash flow planning is largely about strategy but today’s technology offers new opportunities to take that work to the next level. A growing field is the use of predictive AI within the accounting department.
For companies wanting to work proactively with their cash flow planning, AI can be used to build scenarios and identify financial risks or gaps before they become problems.
“These tools are easy to use. For example, an AI model can analyse historical customer payments and identify which customers pay on time and which do not. This gives you a much clearer forecast moving forward,” says Harald, continuing:
“AI can also help forecast the effects of exchange rates and interest rates, as there is so much historical data to build upon. Furthermore, automation can make the process significantly more frictionless with daily updated forecasts that create a completely different level of value.”
Using AI to predict future bottlenecks is only the first step. Once the analysis shows where liquidity gaps are likely to arise, powerful tools are required to take action. For many growth companies, the strategic solution lies in flexible financing.
Managing cash flow challenges is something the skincare brand Common Clouds has experienced firsthand. They operate in an industry characterised by high minimum order requirements and long lead times where strategic thinking regarding cash flow is vital.
“From the moment we place a product order with our suppliers, it takes at least six months before we have the product in stock. We also pay a portion when the order is placed and the remainder when the goods are collected from the factory. This ties up a lot of liquidity, and as we grow, order volumes increase as well. At the same time, we sell a lot through retailers with long payment terms, which means we sometimes tie up capital for up to a year before we see a return,” explains Cajsa Horn.
Despite strong growth and having already reached profitability, cash flow has remained a challenge. By analysing their cash flow, they were able to find a solution that supports their inventory cycles and fuels continued growth. Through Juni’s invoice credit, they now have a strategic solution in place.
“It has truly been a game changer for our cash flow. Through Juni, we can now pay suppliers up to 120 days later, which helps us enormously during periods when we have a lot of capital tied up. The platform is easy to use and provides the flexibility we need to act in real time and grow in line with demand,” says Cajsa.
See and be inspired by how Common Clouds succeeded: Read their case study here.here.
Utilising credit does not have to be about saving a company in crisis; it is a way to strengthen cash flow and create better room for manoeuvre.
“Credit doesn’t have to be a last resort. On the contrary, it can be used to optimise cash flow and ensure that capital is positioned where it does the most good,” Harald maintains.
To help you scale and take your company to the next level, we have created a guide to assist you along the way. Here, you can read about how capital can be used as a tool and how to use it to scale with precision. As mentioned previously, it all begins with analysing your cash flow.
“Bring your cash flow into the light. That is the foundation. Then, use modern tools like predictive AI to understand what could happen in the future. Once you have that insight, you can proactively link strategic measures to it, such as flexible credit that ensures you have the capital to act when growth opportunities arise,” Harald explains.
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