The following is a guest post from Kelley Pruetz, principal research lead at APQC. Opinions are the author’s own.
In today’s economic environment, resilience isn’t just a buzzword; it’s vital for ongoing profitability. While interest rates may have stabilized, the broader landscape remains volatile. Inflation continues to drive up operating costs, customer payment behaviors are shifting and access to credit remains tight. These pressures are unlikely to subside anytime soon.
The findings from APQC’s Cash Flow and Liquidity Management Practices survey confirm this reality, with nearly half of organizations (43%) citing inflation and rising costs as the most significant economic trend impacting liquidity. Thirty-nine percent have already reduced their reliance on short-term borrowing due to higher financing costs.
In this context, resilience means more than the ability to survive the next major disruption. It means building the capacity to adapt, respond and thrive even when the future looks uncertain.
Through steady investments in technology, process improvement and planning, leading organizations are building capabilities to thrive no matter what the financial future might bring.
Top liquidity challenges
Finance functions today are confronting a diverse range of challenges related to liquidity. More than half of the respondents (54%) identified cash flow forecasting accuracy as their biggest challenge, while 52% cited difficulties in balancing their cash reserves with growth. Organizations are also struggling to manage debt, adapt to changing customer payment behaviors and secure reliable sources of funding.
These challenges expose foundational gaps in how organizations are managing liquidity. Widespread difficulty with forecasting and balancing reserves suggests a need for more adaptive, data-driven approaches and for better visibility, agility and planning.
3 strategic responses
Finance functions and their organizations are optimizing cash flow forecasting processes, investing in advanced technology and adjusting their capital and funding to meet the diverse liquidity challenges they are facing today.
1. Improving forecasting processes
More than half of respondents (55%) say they are increasing their focus on forecasting and liquidity planning to navigate liquidity pressures, and 50% said they are working to improve forecasting processes in particular. An optimized forecasting process helps finance teams to anticipate liquidity gaps, test different economic scenarios and make decisions with greater confidence. These benefits, in turn, enable organizations to act early rather than react late.
2. Leveraging technology
Process improvement and optimization help to set the stage for the effective use of technology. Tools powered by automation and artificial intelligence can help to reduce manual errors, improve visibility and enable more timely responses to change. For example, organizations that use finance automation for forecasting reported a median 40% improvement in their forecast accuracy. It’s no surprise to see that about half of respondents (49%) are investing in automation and AI to achieve gains like these and gain real-time liquidity insights.
3. Rebalancing capital and funding strategies
To preserve liquidity and maintain financial flexibility, organizations are making deliberate adjustments to capital spending and funding sources. For example:
- 43% of respondents are increasing their cash reserves
- 36% adjusted their capital expenditures
- 35% secured new credit lines or diversified funding sources
These moves signal a shift from growth-driven spending to more cautious, risk aware financial planning.
Contingency strategies: Preparing for the unexpected
While many organizations have taken meaningful steps to strengthen their liquidity, nearly half (47%) say their strategies are only somewhat effective. Organizations undeniably have opportunities to strengthen their liquidity practices, but it’s also true that even the best laid plans of finance functions can fall short when conditions shift unexpectedly. This is why contingency planning has become a critical layer of resilience for many organizations.
The most popular contingency measure is establishing internal cash reserves for crises (56%). Organizations are also diversifying their revenue streams, using scenario planning and implementing hedging strategies.
These measures ensure liquidity even when forecasts fall short.
The disruptions facing organizations and their finance functions are not going away anytime in the near future. More fundamentally, the practices that used to give organizations a competitive advantage — like the use of technology in forecasting — are quickly becoming prerequisites for competing at all.
Organizations that take deliberate steps to strengthen forecasting, invest in technology and adjust capital and funding strategies are not just managing liquidity; they are building the capacity to adapt, respond and lead. As economic conditions continue to evolve, the most resilient finance teams will be those that treat uncertainty not as a threat, but as an opportunity to work toward smart, more agile financial decision-making.
