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4 ways CFOs can strategically manage days cash on hand: Metric of the Month

Days cash on hand is easy to calculate, but setting the right target has become more difficult. Under increased scrutiny from boards and creditors and amid higher levels of market and economic uncertainty, finance leaders must weigh risk, investment needs and access to capital, at a time when each one can shift quickly.

The latest benchmarking data from the American Productivity & Quality Center shows a narrower range on this metric than many leaders might expect. Top performers (in the 75th percentile and above) report an average of 100 days cash on hand, compared with 85 days at the median, and 70 days on average among organizations in the lowest quartile.

In this case, more is not always better. The right target depends on the organization’s risks, capital needs and access to outside funding.

Set the right target

Managing cash on hand well is less about hoarding cash and more about preserving freedom. It gives leaders room to absorb disruption, invest in the business and act on strategy, while keeping payroll and other necessary outflows secure.

A company with steady collections, strong lending relationships and reliable access to investors may not need the same cash cushion as an organization facing volatile demand, high capital requirements or thin margins. A startup in growth mode will think about this metric differently than a hospital system, a manufacturer or a nonprofit. The right target depends on what is ahead. Are major investments coming? Is revenue exposed to policy or market swings? How quickly could you tap a credit line if conditions worsened? The answers to these questions should shape targets more than any universal rule of thumb.

That said, many finance leaders still treat days cash on hand as a static benchmark when it should function more like a living threshold. Here are four ways to make it more useful:

1. Start with risk, not averages

Benchmarking is helpful, but peer ranges should be the beginning of the conversation, not the end. A target that looked reasonable a few years ago may not reflect today’s reality. Technology projects cost more. Capital markets can tighten quickly. Customers are slower to pay in some sectors, and boards are watching liquidity more closely.

The right target starts with a hard look at what could go wrong and how much time the business would need to respond. That means going beyond modeling revenue scenarios to ask what operational, geopolitical, customer or financing risks could hit cash flow at the same time.

A good place to start is a quarterly review of the assumptions behind your cash target, including sales volatility, collections, planned spending and borrowing capacity.

2. Stress test your worst-case scenario

One of the clearest lessons from the past several years is that leaders tend to underweight disruption until it strikes. Finance teams should push the opposite way. Build a base case, a best case and a real worst case. Then tie each one to actions. What spending pauses if revenue drops? What happens to hiring? What vendor payments become critical? What level of cash gives management enough time to react without making rushed decisions? No forecast catches everything, but good scenario planning gives leaders a head start.

For each scenario, spelling out the actions, owners and trigger points ahead of time ensures that the response is not improvised under pressure.

3. Treat forecasting as a liquidity tool

An organization’s number of days cash on hand usually rises or falls with the quality of its budgeting, forecasting and operating discipline. When forecasts are weak, assumptions are based on stale information or functions are not aligned, liquidity management becomes reactive. Better forecasting gives finance leaders more time to make smarter, more incremental adjustments. It also improves credibility with boards and lenders.

In practice, this means updating forecasts more often, using the freshest operating data, and surfacing variances early enough to do something about them before it’s too late.

4. Know when cash should start working harder

There is another side to this metric that deserves more attention: If an organization builds reserves steadily, there may come a point when the question is no longer whether it has enough cash, but whether too much of that cash is idle. Liquidity should protect the business, but it should also support it. Strong cash positions create options. With enough cash on hand, organizations can explore technology upgrades, capacity expansion and acquisitions. The job of finance is to decide when those options should be exercised.

To keep cash working hard, set clear rules for when it should stay in reserves and when it should fund debt reduction, technology, capacity or other strategic priorities.

For CFOs, the real value of days cash on hand is readiness. When cash is tight, leaders spend more time and energy keeping the doors open than shaping what comes next. With a healthier cushion, they have more room to absorb pressure, weigh trade-offs and keep priorities moving forward. Days cash on hand gives finance leaders a clearer sense of how much flexibility the organization has when conditions change.

https://www.cfo.com/news/4-ways-cfos-can-strategically-manage-days-cash-on-hand-metric-of-the-month-risk-liquidity-investment/816267/

AI as finance pain reliever: Tabs CFO

As they begin to integrate AI further into their systems and teams, the perspective around the technology among CFOs is also beginning to shift. Gone are the early days of experimentation and testing: today, the “smart, strategic CFO” is thinking about how they can tap AI to solve key challenges, Tabs CEO and co-founder Ali Hussain said.

For instance, one of the priorities often cited by potential clients of Tabs — an AI-powered platform for billing, collections and other parts of the invoice-to-cash process — is “we are scaling, and the systems we have cannot support that scale,” Hussain told CFO Dive in an interview. The business has hit a certain revenue threshold, and its current systems cannot catch up to handle simple processes such as the order to-cash process. Such CFOs are seeking areas where technologies like AI could best alleviate key pressure points.

“If something around spend management or reconciliations is working fine, I think they’re just fine with it,” Hussain said of CFOs’ thought processes. “They don’t need an AI strategy there. What they’re looking for is, where is most of my pain?”

Stewards of technology                             

Today’s CFOs are looking for AI-driven solutions which can open up crucial bottlenecks in areas like the order-to-cash process. The greater attention to where AI can best be applied is due to a number of factors, Hussain said: first, CFOs are still navigating a shortage of qualified accounting talent — and the talent they do have is “just not interested” in chasing down payments, he said. Secondly, there’s “a lot of board pressure right now to keep these [finance] teams leaner than ever,” Hussain said.

Hussain co-founded the New York-based platform, which provides AI-powered revenue and reporting tools to finance teams, in 2023, according to his LinkedIn profile. Prior to Tabs, he served seven years as chief operating officer for IT services and consulting firm DOOR — formerly Latch — and held previous roles at Boston Consulting Group and Google.

Yet another factor influencing the strategic application of AI among finance leaders is the fact that many CFOs today “have to demonstrate that they are being good stewards of the new technologies in this world,” Hussain said.

Bringing in AI to make revenue reconciliation or accounting easier and more efficient can be a “big win,” therefore, as finance leaders are both looking to understand how to use such tools and under more pressure from their CEOs or boards to demonstrate to leaders in other areas of the business that they are “walking the walk” when it comes to AI’s use, he said.

In Hussain’s view, it’s also important to note that much of agentic AI’s current usage today comes down to user comfort, and not necessarily its technical capabilities. For instance, Tabs itself sees AI agent usage areas surrounding billing or collections “are more viable for our customers, and they’re more trustworthy using that end to end, than necessarily starting with something more intimate and high risk like audit,” compliance or revenue reconciliation, he said.

 The turning point

Hussain does see 2026 as being a crucial year for AI within finance, he said. For companies such as Tabs, last year was a “massive capitalization moment” where businesses were able to raise large “war chests” of capital to build. In September, Tabs closed a $55 million Series B round led by Lightspeed, aimed at building out AI agents for billing and collections, according to a blog post at the time.

As such, “what I think is really exciting this year is, it’s really going to be the year where the technology and also just the infrastructure we’ve all built is at a turning point,” he said.

That inflection point doesn’t mean the end of the finance team or of certain finance roles, Hussain said, but what it does change is the way CFOs “think about how they spend their time and where they need to try to attract labor on the functional level,” he said.

“I do think there are open questions around, at what point is there a turning point with these technologies where you no longer need a lot of those jobs to be done in the more tactical [finance] roles,” Hussain said, and the focus shifts to enabling those roles to add “value and impact on other parts of their team.”