Optimizing Cash Flow in Uncertain Times: Best Practices for Mid-Size Companies
Let’s face it: operating a business nowadays is stressful.
As your business grows, revenue streams become more complex. Financial risks increase. And before you know it, you’re drowning in impossible decisions.
That’s especially true for mid-sized companies. You’re beyond the scrappy startup phase, but don’t quite have that financial cushion of a larger enterprise.
In other words, you need to make every dollar count. You need to optimize.
But optimizing cash flow is about more than cutting costs and chasing payments. Taking back control demands a smarter, more strategic approach—a framework. And, if you keep reading, that’s exactly what I aim to provide here.
Cash Flow: A Crash Course
As the name implies, cash flow measures the net inflow and outflow of money through your company. Simple as it sounds, there are plenty of caveats to that statement.
You might notice this when looking at your P&L sheet. “Hey, I’m $100k in the green!” Then you check your bank account only to find $20k.
So where did the rest of your money go? In most cases, it’s tied up in three key areas:
- Operations – You gotta spend money to make money. Payroll, inventory, utilities, and rent all fall under operational expenses, which eats into your available cash.
- Investments – From reinvesting in your own company to purchasing external assets and securities, investment activities impact your cash reserves.
- Financing – The tales of your company’s funding and capital management, told through figures such as equity, debt, and dividends.
Cash flow is not the same as profit. A business can be profitable on paper but still struggle with liquidity. Or worse—turn a loss despite strong revenue.
The key to redirecting that cash flow into profit lies in, you guessed it, optimization
Step 1: Analyze
Learning the ebb and flow of cash through your business is the foundation of anything that comes after. Without clear data visualization, you’re basically piloting a ship blindfolded. Without a map. (Also your ship has a hole in it.)
You need the right analysis tools to map out the risks, challenges, and opportunities:
Start with a scenario analysis – When uncertainty strikes, having a plan (or three) on hand makes all the difference. Running “best-case,” “worst-case,” and “most likely” cash flow projections helps you prepare for those unexpected turns, giving your business the agility to adapt—before you’re forced to react.
Rev up rolling forecasts – How often do you check the weather? That’s about how often you want to check your financial forecasts, too. At Quadrant Advisory, we prefer a 13-week cash flow forecast updated at least weekly. This gives you a granular look at your finances in real-time—exactly what you need when things are uncertain.
Ground rough projections with reality checks – Monthly and quarterly financials tell a story—but how does it compare to the one you expected? Tracking actuals against projections helps you spot trends, catch deviations early, and fine-tune your strategy before small miscalculations turn into big problems.
Above all? Don’t drown in the data. The goal isn’t to quantify everything, only the right things. Find the insights that matter, and let them guide your next move.
Step 2: Make A Plan
So you’ve gathered your data. Now it’s time to do something with it.
For mid-sized businesses battling bloat amidst growth, the goal of optimization is twofold:
- Clamp down on non-essential outflows
- Widen the pipeline for your inflows
Let’s look at a few practical ways to accomplish both.
Reducing Outflows
- Try zero-based budgeting (ZBB) – Rather than build your budget by carrying everything over from the previous period, start from scratch. Give each item a hard lookover and ask: “Is this item absolutely essential? What would happen if we cut a few percent on spending in this area?”
- Be careful with credit – As tempting as it is to keep building on credit, watch for the costs of doing so. Variable interest rates and hidden fees can sneakily cut into your bottom line. Renegotiate for better terms and strategically consolidate loans to minimize those expenses.
- Minimize supply chain friction – It’s a simple fact that getting your goods or services into customers’ hands costs you money. So consider which links in that chain could use some oiling, whether that’s getting in good with suppliers or automating background work.
Maximizing Inflows
- Set income KPIs – While you can’t just press a button to make more money, you can control the business decisions that do. So categorize your income and determine what’s working well. That’ll help you set new goals and inform profitable decision-making.
- Analyze your accounts receivable (AR) – A holistic view is good, but sometimes you need to hone in on key areas of your finances. Watch your sales and AR as standalone metrics to position yourself ahead of any income fluctuations.
- Boost revenue – While this is the obvious goal of any business, consider what strategic decisions you can make to enhance cash inflow. Simply tweaking your pricing strategies or introducing a customer loyalty program could be the key to squeezing out that much more profit.
Step 3: Execute and Refine
You’ve analyzed. You’ve built a plan. Now? It’s time to make it happen.
For long-term success, consider assembling a cash flow “task force” dedicated to implementing, monitoring, and refining your strategies. They should also keep every relevant department in sync—especially critical in an era of hybrid and remote work.
Still, even with a strong team in place, optimization is an ongoing process. You need continual analysis, adaptation, and strong strategic foresight. All of which most mid-sized companies just don’t have the time or in-house expertise to do.
Which begs the question: Who can help you bridge that gap?
The Very Best Practice: Bring in a Fractional CFO
By now, you’ve likely noticed that most of these tips are high-level. That’s intentional—every business is unique, and blanket strategies that work for every vertical simply don’t exist.
What is universally true, is this: Your financial situation is far more complex than a cash flow statement would suggest. Navigating that amidst uncertain times demands more than mere numbers. It demands strategic insight. Seasoned guidance.
And that’s exactly what Quadrant Advisory’s CFO services delivers.
If you’re looking for more clarity, control, and confidence over your cash flow—without the burden of hiring permanent financial leadership—it may just be time to bring in a fractional CFO.
Ready to take that step? Let’s talk; my inbox is always open.