How CFOs Can Improve Liquidity Planning
- Fulu Mudau
- Nov 27
- 3 min read
Liquidity is the foundation of corporate stability. When liquidity planning is weak, even profitable businesses face cash pressure, increased borrowing costs, and operational uncertainty. CFOs play a central role in ensuring that the organisation maintains clear visibility of future cash requirements, understands risk exposures, and aligns liquidity decisions with strategy. In South Africa’s volatile environment, structured liquidity planning is essential.
Why Liquidity Planning Is a Critical CFO Responsibility
CFOs influence capital allocation, working capital cycles, treasury decisions, and funding structures. Liquidity planning supports these responsibilities by providing visibility into cash availability, timing of commitments, and financial risks.
Strong liquidity planning helps CFOs:
Protect the organisation from unexpected cash shortfalls
Reduce reliance on expensive short term borrowing
Strengthen lender confidence
Improve treasury decision making
Guide investment timing
Support growth initiatives safely
CFOs who lead liquidity with discipline create resilience.
3. Foundations of Effective Liquidity Planning
Clear Liquidity Objectives
CFOs must define liquidity thresholds, buffers, and minimum requirements.
Visibility Across Cash Cycles
Strong planning requires accurate daily cash views and rolling forecasts.
Segmentation of Cash
Cash must be categorised into operational, reserve, and strategic liquidity.
Integration Across Departments
Sales, operations, procurement, and treasury must provide reliable inputs.
Governance and Policy Alignment
Liquidity planning must align with treasury policy, funding strategy, and capital planning.
Forecasting Structures CFOs Must Implement
Rolling 13 Week Forecast
This provides short term operational clarity.
Monthly and Quarterly Liquidity Forecasts
These guide medium term decisions, including investments and funding.
Scenario Modelling
CFOs must model best case, base case, and stressed liquidity outcomes.
Variance Analysis
Forecast accuracy improves when CFOs lead variance tracking routines.
Working Capital Forecasting
Debtors, creditors, and inventory cycles must be integrated into liquidity views.
These forecasts form the heartbeat of effective liquidity planning.
Treasury Governance and Liquidity Controls
Liquidity planning is only effective when supported by strong governance.
Controls CFOs must strengthen include:
Investment approval matrices
Instrument limits and counterparty rules
Concentration limits
Maturity alignment rules
FX exposure controls
Minimum liquidity buffers
Facility utilisation thresholds
CFOs create stability by ensuring treasury decisions follow structured rules.
Enhancing Working Capital as a Liquidity Lever
Working capital is often the largest liquidity lever available to CFOs. Improvements in cash conversion cycles have a direct and material impact on liquidity.
Key liquidity levers include:
Improving debtor collections
Negotiating better supplier terms
Optimising inventory
Reducing process inefficiencies
Strengthening credit control
Automating reconciliations
CFOs who treat working capital as a strategic priority improve liquidity sustainably.
Market Risks CFOs Must Consider
Interest Rate Risk
Rate cycles influence borrowing costs and investment returns.
Currency Risk
Rand volatility impacts imports, exports, and offshore exposure.
Inflation Risk
Rising input costs strain liquidity and require disciplined working capital management.
Funding Risk
Access to capital changes with market conditions and lender appetite.
CFOs must integrate risk assessments into their liquidity planning routines.
Tools and Systems That Strengthen Liquidity Visibility
Modern CFOs rely on systems that provide real time, accurate financial information.
Recommended tools include:
Treasury dashboards
Cash flow forecasting software
ERP integration
Automated bank feeds
Cloud based accounting platforms
Rolling scenario models
Technology reduces manual effort and increases accuracy.
Practical Examples in the South African Context
Example 1: FMCG Company During Rate Hikes
By implementing 13 week forecasts and cash modelling, a CFO identified pressure months early and avoided expensive borrowing.
Example 2: SME With Weak Debtor Cycles
A CFO strengthened credit policies and reduced debtor days, freeing liquidity for expansion.
Example 3: Corporate Treasury Maturity Upgrade
A CFO formalised segmentation, governance, and forecasting, improving lender confidence during refinancing.
When External Advisory Strengthens Liquidity Planning
External advisory helps CFOs:
Improve accuracy of forecasts
Strengthen treasury controls
Build modelling capability
Evaluate risk exposures
Support lender engagement
Develop liquidity planning frameworks
For support, visit:https://maanocapital.co.za/https://maanocapital.co.za/our-services/https://maanocapital.co.za/risk-management/
Key Takeaways
Liquidity planning is a core CFO responsibility.
Strong forecasting strengthens operational clarity.
Governance protects liquidity decisions.
Working capital is the most powerful liquidity lever.
Advisory support accelerates capability and accuracy.
How can CFOs improve liquidity planning?
CFOs can improve liquidity by strengthening forecasting, governance, working capital management, and treasury integration.
Why is liquidity visibility important?
Liquidity visibility helps avoid cash shortfalls, reduce borrowing costs, and support strategic decisions.
How often should CFOs update liquidity forecasts?
Forecasts should be updated weekly for short term cycles and monthly for medium term planning.
What working capital improvements strengthen liquidity?
Faster debtor collections, inventory optimisation, and better supplier terms all improve liquidity.
How do interest rates affect liquidity planning?
Higher rates increase borrowing costs and require more conservative liquidity buffers.
Why should CFOs consider external advisory support?
Advisory helps improve governance, accuracy, modelling capability, and funding readiness.
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