Do you know where your cash is? In a recent survey by APQC, an independent research firm, nine out of ten CFOs said that they are scrambling to figure out where the cash is and how to keep a firm grip on it.

This is the direct fallout from the ongoing credit crisis. Even credit-worthy companies are finding credit more costly, if they are finding it at all. Two-thirds of companies now have debt ratings below investment-grade, reports APQC senior research fellow Mary Driscoll.

As a result, APQC’s Liquidity Management Poll found that 90 percent of finance executives are taking steps to generate cash internally – a strategy that many neglected during the era of easy money, which only ended, say, two years ago.

Finance-as-usual won’t cut it. Flogging accounts receivables and stretching out payables simply isn’t enough.

So what steps should CFOs take? APQC identifies three things:

1. Conserve cash wherever and however to ensure sufficient cash to make payroll and avoid bankruptcy.

2. Improve forecasting accuracy of future cash flows.

3. Think strategically by boosting liquidity levels to ensure sufficient cash for when opportunities emerge.

To do any of these, however, CFOs need one more thing: visibility into the organization’s various cash-generating and cash-consuming activities. That calls for corporate performance management (CPM), business intelligence (BI), or business performance management (BPM) tools. According to Gartner’s 2009 Magic Quadrant for Corporate Performance Management Suites, “CPM suites can bring greater rigor, accuracy, and transparency to many management processes.”

The operative word is transparency. CFOs need to see the current and projected status of everything that will impact the organization’s cash picture, not just the current receivables, payables, and aging.

The pursuit of liquidity also requires better forecasts, which may entail new practices. Yearly, quarterly, or monthly forecasts aren’t good enough. CFOs really need rolling forecasts of sales, collections, and payables — in effect, nearly continuous forecasts of everything that impacts liquidity.

In its survey, APQC identified five specific needs of CFOs wrestling with the liquidity issue:

1. More accurate customer-demand forecasts.

2. Faster intervention on late-paying customers.

3. Better alignment of inventory and demand.

4. Electronic bill presentment/collection.

5. Negotiation support when dealing with key suppliers.

For tools to address these needs and to increase transparency, Gartner identifies IBM/Cognos, Oracle/Hyperion, and SAP/Business Objects as the three CPM technology leaders. Other interesting players include SAS, Clarity Systems, and Exact Software.

In the easy credit years, CFOs honed their skills as masters of leverage. Those who best leveraged other people’s money (OPM) were heroes. In today’s economy, OPM is gone. It is a new game where cash indeed is king. ###