Shared points of view that avoid single points of failure are helping CFOs accelerate growth.
That’s according to Karen Hartje, chief financial officer at FinTech platform Sezzle, who emphasized during a conversation for “PYMNTS CFO Series: What’s Different?” that cross-departmental communication is critical for business success.
“The role of the CFO is aligned closely with the CEO,” Hartje said. “It’s critical to look forward while thinking about liquidity and being a partner to grow the business in a way that is financially responsible.”
She added jokingly that there is “CEO math” and “real math.”
Instead of each departmental leader bringing their own goal of achieving growth to the table, it’s important to cross-pollinate and come together to work toward the same goal, Hartje said.
That’s true particularly within today’s new macroenvironment, where bank collapses and economic contractions are increasingly evolving the way finance leaders take stock of how their banking relationships and cash diversification strategies can impact growth.
Read also: SVB Collapse Has Companies Reviewing Financing, Cash Management Strategies
Sezzle used Silicon Valley Bank (SVB) for the organization’s operating account up until the day the bank failed, and Hartje highlighted that the lender’s collapse “changed the conversation” around bank risk for her organization.
“We opened another operating account with a bank we already had an existing relationship with, and then we decided that we should probably have more redundancy, even in our operating accounts, and so we opened even more accounts with different banks [just to address this],” she said.
It’s the new normal, Hartje added, explaining that the idea of not putting “all your eggs” in one basket “goes beyond” banking relationships to now affect the risk strategy for all organizational relationships.
Finance leaders are now more attuned to the potential risks posed by their banking relationships and are taking steps to ensure that they have properly deployed cash reserves able to weather any unforeseen events.
This has led to an increased interest in diversifying cash holdings across multiple banks and financial institutions.
“There was an immediacy to looking at all our relationships and figuring out where we need more redundancy, going to the board and [other management] and letting them know that this is where we are at,” she said.
Overall, the new macroenvironment has made it essential for finance leaders to be more strategic and proactive in managing their banking relationships and cash diversification strategies.
Hartje stressed that avoiding a single point of failure goes beyond just banking relationships, adding that vendor and supplier relationships should be similarly diversified to mitigate the potential impact on the business of any one major failure.
By staying informed about market developments and trends, and by leveraging technology and digital tools, finance leaders can ensure that their organizations are well-positioned to navigate the challenges and opportunities that lie ahead.
See also: CFOs Look Back on 2022 as the Year of Digital Transformation
“Nothing is more fundamental to a business, no matter the business, than having a strong cash flow,” Hartje said. “That’s why it’s so important to focus on diversifying banking and other relationships that are related to cash.”
The ongoing challenge for CFOs is managing enterprise growth with spend. In challenging economic environments, it becomes increasingly important for business leaders to have a transparent, high-level view of their operations that informs where to continue to invest, where to pull back spending, and how to leverage modern technology to provide an optimal return on investment (ROI).
“If you can effectively strike that balance between growth and profitability, then you will have a business that is unstoppable and highly successful,” Hartje said.
Still, she noted that a knock-on effect of the SVB collapse and broader macroclimate is that getting debt financing in the capital markets will likely become “more challenging,” meaning that organizations are more “constrained” on how they can grow.
However, with the rise of digital banking and payment systems, finance leaders have access to new, modern ways to streamline their cash management processes while improving efficiency.
These include digital banking tools and platforms, such as mobile banking apps, online payment systems, and treasury management systems, that allow finance leaders to monitor and manage their cash positions in real time.
“Digital solutions are here to stay,” Hartje said. “We have a young consumer base, and that’s what they want. That makes it incumbent upon everyone to do their homework and build a strong company in terms of those digital solutions.”
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