The Juice is Worth the Squeeze: Cash Management as a Strategic Imperative

The macro environment remains, as ever, uncertain. The pre-election consensus of steady and significant monetary easing has evolved into one where the risk-free rate will remain higher for longer. Set against the backdrop of recent years, which saw a return to zero interest rate policies followed by the fastest hiking cycle in decades, balance sheet management, covering both cash and debt, remains a critical strategic imperative.

We encourage CFOs to go beyond maintaining liquidity to managing it with intention. The focus should not only be on how much cash you have but on how efficiently that liquidity is being utilized. In a volatile rate environment, passively leaving funds in low-yield accounts is a missed opportunity and, as we’ve seen, may increase risk. The same applies to debt: actively managing a prospective lending group and keeping a close eye on credit markets can secure better borrowing terms and lower costs.

Cash is one of the most important assets for any organization, second only to people and intellectual property. The common twin pillars of investment policies—capital preservation and liquidity—are essential, but often overlook the opportunity to optimize total return. Active cash management does not mean taking on significant credit or duration risk; rather, it encourages finance leaders to avail of more compelling risk-adjusted opportunities.

Evolving Past Excel

As companies scale, relying on Excel for treasury management can quickly become a constraint. Heavy reliance on manual and siloed Excel reports and workflows limits real-time insights and can lead to inefficiencies and inaccuracies. Specialized treasury technologies that integrate with core accounting and other Finance applications enabling Finance teams to automate cash positioning, improve liquidity forecasts, and make strategic cash decisions. Moving beyond spreadsheets is essential for optimizing working capital, maximizing yield, and ensuring treasury aligns with the company’s growth objectives.

Every Basis Point Matters

Many finance leaders, especially in early-stage companies, view cash management through an operational lens. This approach, while prioritizing safety, can miss the opportunity to turn liquidity management into a strategic lever for long-term value creation. Liquidity has a price; liquidity providers should be appropriately compensated.

Leaving cash in low-yielding accounts is not just a missed opportunity – it can introduce risk. With the right products, such as money market funds and institutional separately managed accounts (SMAs), finance leaders can optimize cash returns without compromising liquidity and rely on the expertise of professional asset managers.

SMAs offer flexibility and control, allowing companies to adjust their strategies in both rising and falling rate environments. By extending duration at the peak of a rate hike cycle or reallocating toward floating-rate U.S. Treasuries when rates fall, these tools can generate meaningful returns at a low cost.

Building a Lending Network

Debt management is just as crucial as cash management. Building and nurturing relationships with a network of institutions can provide critical support for future borrowing needs. A diverse set of lending relationships not only offers more flexible credit options but also enhances negotiating power when market conditions shift. Finance leaders who take a proactive approach to monitoring credit markets can secure favorable terms, reducing the cost of debt and positioning their firms for growth.

Bottom-Line Benefits

Effective cash management isn’t siloed—it must be integral to a company’s broader financial strategy. As companies prepare for an IPO, aligning cash management with corporate goals ensures that resources are deployed to support growth, optimize the capital structure, and drive equity value.

For finance leaders focused on core metrics like unit economics, investing in a comprehensive cash management program offers clear advantages. Treasury is one of the few areas within G&A that can generate meaningful income with minimal cost—an opportunity no CFO should overlook.

Counterparty diversification, institutional money market funds, and SMAs give finance teams the tools to optimize liquidity while maintaining flexibility to respond to market conditions.

Takeaways

For companies at any stage, and especially those experiencing rapid growth, active balance sheet management is essential; active cash management is not simply about burn rate. CFOs must proactively manage both cash and debt to navigate market uncertainty, support growth, and lay the foundation for long-term success. Key actions include:

• Formalize an Investment Policy: Clearly define the dual goals of capital preservation and liquidity, ensuring the company’s liquidity needs are balanced with the pursuit of yield and diversification.
• Leverage Technology: Centralize cash and investment data to inform your near and intermediate term liquidity needs and utilize specialized technology to generate cash forecasts
• Strategically Manage Liquidity: Regularly assess how much liquidity is necessary for operations and strategic priorities, and optimize yields through effective cash management strategies such as money market funds and institutional SMAs.
• Build a Lending Network: Cultivate relationships with multiple banking institutions to increase access to diverse lending options and negotiate favorable terms.
• Monitor Credit Markets: Stay informed of credit market conditions to secure optimal borrowing terms and reduce overall debt costs, enhancing growth potential.
• Integrate Cash Management into Strategy: Align cash and debt management with corporate goals, particularly in preparation for significant milestones such as IPOs, ensuring resources are deployed to support growth and capital structure optimization.

By embedding balance sheet management into broader financial strategy, CFOs can maintain maximum flexibility to pursue opportunities for long-term growth and success.

About the Contributors

Christopher Rogan is a member of WestCap’s Capital Markets team within StratOps, where he leads initiatives focused on treasury and balance sheet management. With over 15 years of experience in treasury and corporate finance, he previously held roles at Apple and Airbnb, where he developed and deployed financial strategies and operations. Connect with him on LinkedIn.

The above is provided as an illustrative example and designed to demonstrate the benefits to portfolio companies of partnering with us. The information is aimed at prospective portfolio companies and not intended to solicit investors, or an offer to purchase any securities. The experiences highlighted may not necessarily represent or be indicative of current, past or future results and experiences with portfolio companies.