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Giving your working capital plan a fresh look

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Note from the editor

The pandemic was a testing ground for finance leaders’ approach to working capital. If you were keeping too little of it, you knew right away that had to change; a good rule of thumb at the height of the uncertainty was to have two years worth to help ensure your organization could survive what was then considered a worst-case scenario. 

If you had too much if it, at least for the duration of the pandemic, that was no longer a bad thing. In ordinary times, you want to limit your working capital to a ratio of between 1.0 and 1.2, generally speaking, although the right amount is different for every organization. But during the pandemic it made sense to raise that to 1.7 or 1.8 if you could. 

With the pandemic easing, at least in the United States, it’s a good time for CFOs and other finance leaders to take a fresh look at their working capital plan to see what’s right for their organization. To help you do that, we’ve compiled a handful of pieces from CFO Dive that touch on working capital issues. We hope you find the selection useful as you think about the right approach for your organization.

Robert Freedman Editor

Getting your working capital ratio right

Whether your ratio should be closer to 1.2 or 1.8 is less important than what your cash conversion cycle is telling you, cash management specialists say.

5 signs you're about to run out of cash

Cash is surprisingly hard to track, and knowing when it's about to run out is harder if you don't know the warning signs.

Making the most of the cash-to-cash cycle

The finance function can encourage efforts by procurement to provide value when it comes to arranging and reviewing supplier contracts.

How to smooth your lead-to-cash process

The CFO is best positioned to turn an often unruly system into a seamless customer experience.

4 ways CFOs can cut waste in spending on the cloud

The typical company wastes as much as 35% of its cloud budget, estimates show. Wasteful spending rose as many companies rushed to move operations into the cloud during the pandemic.

How to better align business travel costs to revenue

A travel startup tries to increase CFOs' visibility into the third highest cost category they face.

Business spend management tools gain traction during the pandemic

Despite the COVID-19 impact, expense management software companies can expect 10.5% compound annual growth through 2024, research shows.