Scarce resources, tight credit, and costly financing have made cash a critical factor in mid-size companies’ plans for growth. Senior finance executives at mid-size companies say that cash from ongoing operations is likely to be their primary source of growth capital over the next two years, according to a new report from American Express and CFO Research.

The report, “Cash and Liquidity Management,” surveyed 325 senior finance executives at mid-size companies in the U.S. to understand how these firms are currently managing their cash flow, as well as their priorities and plans for improving cash management and working capital in the next few years.

“Mid-size companies can be vulnerable to economic swings, making cash flow management key to their ongoing stability and growth,” said Darryl Brown, President, Americas, Global Corporate Payments, American Express. “In a tight financing environment, access to liquidity can make the difference between simply enduring an uncertain recovery versus taking advantage of opportunities to move your business forward.”

Cash Flow is Critical
More than half of senior finance executives (56%) report that cash from retained earnings (cash derived from operations) has been their companies’ major source of growth capital over the past three years.

• Less than one-quarter (24%) relied on secured or unsecured debt financing
• Just 8% relied on equity financing

This focus on cash will intensify in the years ahead. A large majority of finance executives (78%) say that cash from ongoing operations will be their companies’ primary source of growth capital over the next two years. Just 14% of respondents disagreed with this sentiment.

Smarter Cash Management
When senior finance executives were asked which changes would contribute most to their ability to manage cash flow effectively, the leading choices were:

• Motivating account-relationship holders to help with collections (40%)
• Increased use of electronic payments (38%)
• Improving the timeliness and accuracy of cash forecasting (30%)

Finding Reliable Financing
Senior finance executives are also focused on securing reasonably priced, reliable sources of short-term financing.

• Commercial bank financing is the most common method, with 58% of respondents using it frequently or occasionally.
• This category is followed closely by “float” realized through corporate credit cards, charge cards or procurement cards, with 55% of respondents using this method frequently or occasionally.

“The research reveals that mid-size companies are relying on various payment methods, such as electronic payments and commercial cards, to help boost their cash flow,” continued Brown. “That’s the right move. Companies that increase adoption of these payment methods not only improve their working capital, but can increase the visibility and control of their payments, reduce costs and improve their accounts-payables process overall.”

About the Survey
CFO Research Services surveyed 325 senior finance executives at mid-size companies across a wide range of industries in the United States. Company revenues ranged from $10 million to $500 million. The research program, which included an online survey and interviews with senior financial executives, was completed in January 2012.

About American Express Global Corporate Payments
Through its Global Corporate Payments group, American Express provides the Corporate Card, Corporate Purchasing Solutions, and other expense management services to mid-sized companies and large corporations worldwide. In the U.S., it is a leading issuer of commercial cards, serving more than 70% of the Fortune 500, as well as tens of thousands of mid-sized companies. American Express issues local-currency commercial cards in more than 40 countries, and International Dollar Corporate Cards in an additional 100+ countries. For more information, visit www.americanexpress.com/corporate.

About CFO Research Services
CFO Research Services is the sponsored research group of CFO Publishing LLC, which produces CFO magazine, CFO.com, and CFO Conferences. CFO Publishing, a portfolio company of Seguin Partners, is the leading business-to-business media brand focused on the information needs of senior finance executives. CFO Publishing has long-standing relationships with more than 500,000 finance executives.