Several US treasurers are accumulating higher than average cash reserves at a time when businesses are also reporting slower than target growth. There are, of course, valid reasons for the slow growth such as increasing market volatility, fiercer competition, disruptive technology, and even rising globalization.
However, we ask the question – why are organizations amassing more than necessary cash reserves instead of investing them?
One theory why organizations behave this way is because the market has become very unpredictable these days that making sure an organization has enough cash might be a way to address their anxiety.
Another possible reason why an organization is not investing is simply because the organization struggles with finding the answers to business critical questions that may potentially help them understand where best to put their money in order to drive long-term growth.
Either way, both theories call for improved corporate financial planning.
The Value of Corporate Financial Planning
Financial Planning and analysis is more than just a routinary exercise for an organization. It is an important process that allows the organization to understand the entirety of how the business was operated and how it should be operated moving forward.
Financial planning and analysis provides organizations a solid foundation for every business decision they make.
The scenario of having higher than average cash reserve for an organization presents an opportunity for it to invest. This is usually achieved through CAPEX, mergers and acquisitions, share buyback or debt reconciliation. While FP&A teams serve only as a machinery with the final shots being called by the CFO of the company, it is the process of financial planning and analysis that guides the CFO as he or she manages the organization.
Without the ability to skillfully turn data into actionable information, the CFO and the FP&A team will be unable to fulfill their function which is to identify risks and opportunities for the business among others.
Robust Corporate Planning with Performance Canvas
Financial planning and analysis extends beyond just the process itself. It includes the ability to glue and align people, processes, and technology within the organization in order to reach its goal of being able to answer critical business questions when it matters most.
Performance Canvas by DSPanel is one of today´s most modern FP&A solution that equips organizations with a good and intelligent workflow, industry best practices when it comes to budgeting and planning, improved collaboration, enhanced transparency,and greater accountability.
Performance Canvas offers cutting edge rechnology for financial planning and analysis that will enable fp&a teams to come up with reliable answers to business questions, a solid basis for business decisions and all these achieved in a very short period time.
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