Strategic advice | January 2025 Optimizing cash management in times of company transition

If your company transition is going to be in the form of a new leader who will be looking to implement new strategies, you may need to adjust your cash-flow objectives to set them up for success. Even if cost-cutting is a future priority, there’s a good chance that any new plans will take some amount of cash-flow flexibility to implement.

Ideally, companies have time to plan for big transitions such as a new leader. When that’s the case, having an exit plan for the outgoing executive or owner that guides issues such as the hiring of a successor, the handover of authority, and pending contractual and financial commitments can help shape pre-transition spending priorities.

From a cash-flow strategy standpoint, when a transition is known to be on the way it’s a good time to focus on the company’s core competencies and existing relationships, according to Warlick.

“That way the team can stay focused on whatever challenges the change might bring, and tailor new initiatives to the new circumstances when they arrive,” says Warlick.

A new leader’s long-term goals or shifts in the business model may require more dramatic cash-flow strategy changes such as canceling planned major expenditures, restructuring the workforce, or raising new capital. In any case, a company facing a leadership transition is well-advised to focus on financial transparency ahead of time, so the new leader has the information he or she needs when they arrive.

Even if you need to adjust them in the future for transition purposes, incorporating smart cash-flow strategies long before a transition can mitigate risks associated with change. For example, if you’re the owner of the company and only taking compensation in the form of dividends from profits, it’s best to shift to a formal salary through payroll ahead of any major transition. That will allow for greater transparency for a buyer or new leader, and better forecasting of future cash flows. 

Incorporating shorter time horizons into your planning process is one way to add flexibility and adaptability to cash flow, a strategy sometimes known as agile financial planning.^{Disclosure 3} This may be beneficial no matter what type of transition your company undergoes. Agile financial planning is based on principles that first took hold in the quickly evolving software development industry in the 1990s. The idea is to shift organizations away from rigid annual budgets and toward shorter cycles allowing for real-time adaptations.

“Don’t wait to find an optimal cash-flow strategy to benefit your ongoing operations,” says Warlick. “A documented history of smart cash flow is crucial for any transition.”

The benefits include faster responsiveness, increased accuracy of forecasting and better-informed resource allocation, all of which are helpful in times of change. The move from traditional to agile financial planning isn’t lightly undertaken, though, so close consultation with your Truist relationship manager is important throughout.

At some point, transition is certain to happen within your business. Adjusting your cash-flow strategies to prepare for different types of change helps improve the odds that the transition will be a positive one for you and the company.