In November 2008, CFO Research conducted a survey among mid-size companies in the United States on the actions that senior fi nance executives are taking to ensure adequate capitalization to support their companies’ growth over the next year. We collected 129 responses from qualifi ed senior fi nance executives.

1. No Stone
Unturned
STRATEGIES FOR
CASH MANAGEMENT
IN HARD TIMES
A report prepared by
CFO Research Services
in collaboration with
American Express

2. ABOUT THIS REPORT BACK TO THE BASICS
In November 2008, CFO Research conducted a In the face of tight credit markets and a shrink-
survey among mid-size companies in the United ing economy, finance executives tell us that the
States on the actions that senior finance executives core finance activities of funding the company and
No Stone Unturned STRATEGIES FOR CASH MANAGEMENT IN HARD TIMES
are taking to ensure adequate capitalization to sup- ensuring liquidity are becoming more imperative
port their companies’ growth over the next year. even as they become more challenging.
We collected 129 responses from qualified senior
finance executives. This research program finds that finance execu-
tives are refocusing their attention in these diffi-
cult times on wringing cash from their businesses
wherever they can find it. And in the vacuum
Respondent Titles
created when lenders suddenly stopped lending,
These executives work
finance is looking beyond conventional improve-
for companies from a
Other ments in working capital management to make
broad distribution of
11% industries; no single sure that no opportunity for keeping the company
Director
industry represented
well funded goes unexplored.
of Finance
more than 15% of
12%
total responses.
“
VP of CFO
Respondent
57%
Finance
Titles
12%
We are generally being more
conservative as we cannot make the
Controller
13%
assumption that the normal forms
Nearly all respondents
”
(95%) were from mid-size
of liquidity will be there for us when
companies with revenues of
between $10M and $2B.
we may need them.
-CFO, financial services company
Mid-market companies:
Our survey revealed a shift in focus among finance
Action-oriented and nimble
executives as their companies prepare for the
Fully 95% of the respondents in our survey
changing times. In recent years, as companies grew
come from mid-size companies with between
with the economy, so too did the scope of CFOs’
$10 million and $2 billion in revenues. These
responsibilities. Performance consultant, business
companies typically are the backbone of the
strategist, compliance steward, risk manager, in-
business world—numerous, nimble, with high
vestment manager, M&A expert—these and more
growth trajectories and high expectations.
are the roles that senior finance executives have
played during recent years of economic growth.
Many of them also are positioned at a tipping
point between the small, focused, hands-on
Then the world changed—the subprime bubble
organization that they started out as, and the
burst, credit markets froze, and the economy began
large, complex, and widespread operation they
to grind down. The growth-oriented business and
are growing to be. Their growth may, in fact,
financial strategies formed at the beginning of the
be outpacing their infrastructure, and they are
year suddenly became yesterday’s news, and execu-
becoming more aware of the need for more
tive management began to call on their colleagues
robust systems and more formal processes
in finance to refocus their attention on liquidity
that will help them manage that growth.
and to reformulate their plans for the year ahead.
The current economic turmoil can only add
In response, many finance executives are now
to these companies’ growing pains. Up until
leading a movement to get “back to the basics,”
now, market growth may have fueled their
as one respondent noted. But it’s not that finance
organizations. Faced with a no-growth
executives are being called on to do less—instead,
environment, finance executives must develop
they are re-sorting their priorities to uncover every
and deploy a different skill set, focused on keep-
opportunity to manage expenses and bolster work-
ing their companies lean and conserving cash.
ing capital.
2 November 2008 © cfo publishing corp.

3. PROTECTING
Figure 1. Is your company more likely
THE BOTTOM LINE to focus on increasing top-line revenue
or bottom-line profits in the next
We asked finance executives how they
12 months?
would focus their actions in the coming
59% of all
year, whether on top-line revenue growth
respondents
or bottom-line profits. In CFO Research
Focus on
surveys over the past several years, responses top-line
to this type of question generally have revenue,
25%
either tipped toward revenue growth or
yielded a 50/50 split, with half of the com- Focus on
No-Growth
bottom-line
panies responding that they focus on the Companies
profits,
top line and half on the bottom line. 75%
This current survey, however—taken as the eco-
nomic tide has begun to turn—reveals a change in
focus. What had been in the past a 50/50 split has
now tilted 60/40 in favor of the bottom line. Finance
executives are starting to adapt their financial strat-
41% of all
egies to fit the times. respondents
But our survey also reveals a split in outlooks
among companies. We asked finance executives
about their prospects for short-term revenue
Focus on Focus on
growth. Almost 6 out of 10 (59%) predicted that
bottom-line top-line
Growth
their companies would see either no growth or profits, revenue,
Companies
49% 51%
actual declines in revenue; only 41% replied that
they expect their companies’ revenues to grow next
year, despite the general slump in the economy. In
contrast, more than 90% of respondents in a 2006
CFO Research survey foresaw substantial or modest
top-line growth in the two years ahead.
Percentage of respondents
Given such a fundamental difference in outlook, we
then examined survey responses through these two
lenses: those respondents who are from “growth”
companies and anticipate some revenue growth Not surprisingly, companies that expect to see no
in the year ahead; and those who are from “no- revenue growth over the next year are even more
growth” companies and are outfitting themselves focused on maintaining what profitability they
for flat or declining revenues. can. Three-quarters of finance executives from
“no-growth” companies say that they will seek to
increase bottom-line profits more than top-line
{
revenue. Finance executives from “growth” compa-
Nearly 6 out of 10 finance nies show a more typical 50/50 split between a focus
on the top line and a focus on the bottom line. (See
executives expect revenues to stay
Figure 1.)
flat or actually decline in the
coming year. Clearly, more and more finance executives have
begun turning their attention inward in an effort to
increase shareholder value—or at least preserve it.
3
november  © cfo publishing corp.

4. Nearly three-quarters of the finance executives CRITICAL FOCUS:
overall tell us that streamlining operations and
WORKING CAPITAL
reducing non-operating expenses will be more
important this year than last year. Other types of
In the wake of the financial crisis,
actions—partnering with other businesses, invest-
No Stone Unturned
finance executives’ top priority
STRATEGIES FOR CASH MANAGEMENT IN HARD TIMES
ing in technology, pursuing mergers and acquisi-
has become managing their
tions, and outsourcing—all take a back seat to
companies’ cash flow more
reducing costs and preserving profits.
aggressively to keep their
businesses going.
{
Faced with a no-growth economic
Asked to rank the importance of liquidity
environment, finance executives management activities in light of recent changes
across the board are changing in the financial markets, the executives in our
survey overwhelmingly pick improving working
course and actively pursuing
capital processes and forecasting cash flow as their
efficiencies in both operations number-one priorities. Negotiating business terms
and the back office to with creditors is viewed as moderately important,
although not a top concern. Securing loans—
protect profitability. whether long-term or short-term—is consistently
ranked as the lower priority in these times.
(See Table 1.)
This pursuit of efficiency takes on the proportions
of a mandate for the “no-growth” companies in
our survey. More than 80% of finance executives
Table 1. finance focuses on Working Capital
from these companies say streamlining operations
is more important for their companies than a year
{
1. Improving internal
ago. (See Figure 2.) Nearly the same proportion tells
business processes that
us that reducing non-operating expenses is also
Top Priorities: affect working capital
more important this year than last.
Internal Liquidity
Management 2. Forecasting company
Becoming leaner is important even at the growth
cash flow
companies. More than 60% of finance executives
from companies expecting some revenue growth
3. Negotiating business terms with creditors
in the year ahead still say that controlling costs is
more important to them than it was a year ago.
{
4. Securing short-term
(See Figure 2.) Belt-tightening is the order of the day.
borrowing from
Bottom Priorities: commercial lenders
External Credit 5. Securing long-term
borrowing from
commercial lenders
Figure 2. Belt-tightening
is the order of the day.
This is not to say that credit is any less important to
“More important than a year ago”
100%
companies now. Only a handful of the respondents
in our survey say that they plan to spend any less
time strengthening their company’s credit rating
83% 82%
62% 62% or securing short-term financing. Rather, the large
majority simply tell us they don’t plan to spend any
more time on those activities this year than they did
0%
last year. (See Figure 3.)
Reducing non-operating Streamlining
expenses operations
The opposite is true when it comes to cutting costs,
No-Growth Companies Growth Companies
getting better at planning and forecasting, and
Percentage of respondents improving cash management. Across the board,
4 November 2008 © cfo publishing corp.

5. Figure 3. Over the next year, do you expect your finance team will spend more or less
time on the following activities, compared with a year ago?
100%
40%
80% 44%
81%
83%
60% 85%
40%
60%
56%
20%
19%
17%
15%
0%
Cutting cost of Improving cash Developing better Strengthening credit Securing short-term
operations management processes budgets, plans, and rating or balance sheet financing
forecasts
Less time or no change More time
Percentage of respondents
8 out of 10 finance executives say they expect their Table 2. Turning to Cash
“
finance team to spend more time on these activities Management in Hard Times
over the next year. (See Figure 3.) Finance execu-
tives say they are ready to put their money where Reduce days sales outstanding and better
their mouths are. cash flow projections as well as reduce
capital spending
Keeping a close eye on cash flow is no longer just a
Slow payments, aggressively collect AR
matter of management philosophy—it has become
an imperative for survival. Finance executives are
Improve DSO, DPO, and inventory turn
turning away from financing schemes and getting
back to basics—taking costs out, running lean and
Tighten cash management/forecasts
efficiently, optimizing working capital, and overall
keeping closer tabs on financial performance. Aggressively reduce working capital
(inventory/receivables)
Finance executives appear to recognize that the
Exercise tighter control over working
time has come to take matters more into their own
capital components
hands. Credit markets remain tight, and the outlook
for economic growth remains bleak. Managing cash
Audit billing and collection processes
flow requires much more focused attention now
than in flush times.
Rein in extended terms to customers
We invited finance executives to offer other meth- Adhere to benchmarks better
ods they expected their companies to use to meet
”
Tighten AR and drop poor paying
liquidity requirements over the next year. The
customers
largest number of responses center on standard
working capital management maneuvers—such as
Reduce G&A
aggressively managing accounts receivable, stretch-
ing out payments, and working down inventories to
maintain their cash position. (See Table 2.)
5
november  © cfo publishing corp.

6. But finance executives aren’t stopping there. They
are opening up the financial toolkit for whatever A Broad Vision for Growth: One Example
tools they can find to ensure their companies from the Health Care Industry
maintain the cash flow needed. (See Table 3.) A “We intend to increase revenue slightly in core
good number of respondents tell us that they are businesses by accepting new contracts more
No Stone Unturned STRATEGIES FOR CASH MANAGEMENT IN HARD TIMES
exploring more creative, “one-off ” types of actions selectively while growing revenue more aggres-
to reduce liabilities and free up cash. Many say they sively in newer business lines by investing wisely
plan to sell off less productive or short-term assets, in sales people and relationships.
while others are looking to alternative financing
arrangements—such as refinancing and leasing— In addition, we will tighten the operating costs
to allow them to increase liquidity and optimize in our core business by minimizing additional
cash flow. headcount and move our new businesses to
operating profit with cash management of these
newer businesses being more important than
ever. In other words, we will endeavor to reduce
Table 3. Opening Up
“
spending ahead of the revenue curve.
the Financial Toolkit
We will also manage our expectations with
Sell unused assets
ample margin for missing optimal financial targets.
Seek overseas markets As a peripheral strategy, we are chasing regulatory
support to protect our business lines.”
Refinance equipment over longer
term to utilize cash
Look to make long-term assets more
liquid via agreements or putting
LEAVING NO STONE UNTURNED
certain assets up for sale
In the face of an economic upheaval unprecedented
Equity round
in our lifetimes, finance executives are working
Release cash by selling assets already even harder to protect the bottom line. The outlook
on the balance sheet for growth becomes cloudier by the hour, and so
finance is pursuing every opportunity to keep costs
Lower leverage of balance sheet by down and cash flowing.
selling short-term investments
They are holding the line on costs in both opera-
Explore all options with
tions and back-office functions. They are relying less
potential lenders
on the easy credit of the past to fund growth, and
are aggressively controlling expenses, selling down
Sell assets not contributing to ROIC
inventory, stretching payments, and tightening
Shareholder funding accounts receivable. They are also looking further
afield for new and creative ways to make sure they
Increase tactical programs to have the cash they need to keep going.
improve revenue streams
”
A CFO in the transportation industry says bluntly,
Lease financing
“We are not looking for growth, rather we are con-
centrating on the core business.” Turning its gaze
Divest low-margin lines
inward, finance is taking up all the tools they have
of business, layoffs
available to keep their companies on course through
turbulent times.
6 November 2008 © cfo publishing corp.

7. SPONSOR’S PERSPECTIVE
In this challenging economic environment, mid-mar-
ket companies are increasingly focused on pursuing
efficiencies and maintaining profitability. Manag-
ing cash flow, securing financing, cutting operating
costs—these are just a few of the activities that are
consuming more of the attention of senior financial
executives in these hard times. And it’s no surprise
that they have a heightened desire to control expenses.
A confident outlook:
Opportunities for growth
When asked about growth strategies in the At American Express, we partner with mid-size
face of a challenging credit market, nearly companies to better understand the challenges and
three-quarters of executives who responded opportunities they face. In the current climate, our cli-
to the question—including many from ents are using our products, services, and expertise to
“no-growth” as well as “growth” companies help them manage cash flow, monitor spending, drive
—say they will pay more attention to the savings, and improve process efficiency. We work with
“”
customer: them to help them achieve their short- and long-term
expense management objectives in a number of ways:
Organic growth through improved
customer relations • Interpret spending data to make smart busi-
ness decisions. Our analyses give companies
Continued customer contact and service insight into spending across their organizations,
which they then use to monitor compliance, ana-
Focus on our core business,
lyze spending trends, enforce policies, and iden-
leveraging existing relationships
tify savings opportunities. Customizable spending
limits and liability options also help companies
to maximize control over business expenses and
Interestingly, a substantial number of contain costs.
respondents say they are looking to grow • Automatic supplier savings. Our clients realize
market share, largely by targeting weakened
“
company-level savings on everyday business expens-
competitors: es at preferred suppliers through programs such as
the Savings at WorkSM program and the American
Aggressively attack weaker competitors
Express®/Business ExtrAA® Corporate Card.
who are facing cash/credit challenges
• Cardmember benefits and services. Our
Picking off weak competitors Corporate Card program can help to increase em-
ployee compliance, convenience, and satisfaction.
Taking advantage of distressed
Whether this means additional assistance when
”
acquisition opportunities
on the road, Corporate Platinum Card® benefits
such as airport lounge access, or enrollment in our
More customer-facing
award-winning Membership Rewards® program,
activities to take share
companies can provide services that increase em-
ployee productivity, safety, and security.
These financial executives continue to have
confidence in their own companies and their For information about American Express’ expense
own ability to pull through, and perhaps management solutions for mid-size companies, please
even gain an advantage in the down economy. visit www.americanexpress.com/corporate.
Even as they strive to rein in costs and manage
Sanjay Rishi
cash, they are looking toward the horizon to
Executive Vice President,
come out stronger on the other side. U.S. Commercial Card
American Express Company
Note: Terms, conditions, and exclusions apply. Savings at Work terms
and conditions apply and may be found at www.savingsatwork.com.
7
november  © cfo publishing corp.

8. No Stone Unturned: Strategies for Cash
Management in Hard Times is published by
CFO Publishing Corp., 253 Summer Street,
Boston, MA 02210. Please direct inquiries to
Jane Coulter at 617-345-9700, ext. 211, or
janecoulter@cfo.com.
CFO Research Services and American Express
developed the hypothesis for this research jointly.
American Express funded the research and publi-
cation of our findings. We would like to acknowl-
edge Bartholomew Baptista, Megan Freiler, and
Janet Lee for their contributions
and support.
At CFO Research Services, David Owens
directed the research and wrote the report,
and John Fischer designed the report.
CFO Research Services is the sponsored research
group within CFO Publishing Corp., which pro-
duces CFO magazine in the United States, Europe,
Asia, and China. CFO Publishing is part of The
Economist Group.
November 2008
Copyright © 2008 CFO Publishing Corp., which
is solely responsible for its content. All rights
reserved. No part of this report may be
reproduced, stored in a retrieval system, or
transmitted in any form, by any means,
without written permission.