8 ways to ... improve cash management across your business: having a cash culture in the finance function is useless unless frontline staff understand its importance--and how they affect it. Here are eight ways to get the message across.

AuthorYoung, Richard
PositionThe list

1 Keep it simple

At its most basic, the message needs to be: "Cash, not sales or supplier discounts, is what pays your wages every month." Then you'll need similarly straightforward sound bites to drive the right behaviour in each team (see point seven).

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"Don't use a funds flow format, for example," says Paul Hinder, former financial controller at Cable & Wireless and now a plural non-executive and portfolio CFO. "What does the 'change in debtors' in a funds flow mean to most people? Probably nothing. It's the effect of two forces--revenues and cash collected. So why not measure them separately in a way that means more to people within the business?"

2 Set the right balance

Accountants need to think in terms of sales and profits as much as working capital. "Cash is the toughest covenant our bank uses--every month, we have to be cashflow-positive on a rolling 12-month basis," says Frank Eliel, FD of Signs Express and part of the MBO team at the company. "That means we need a substantial profit on any new capex within a year. And it's a reminder that cash all starts with the top line. If that's not working, no amount of debtor or stock management will help."

If you get the balance wrong and focus too hard on cash with sales and operational managers who probably think they're doing a great job, be prepared to rename yourself "sales prevention officer" or "Scrooge". Positive incentives--such as bonuses related to cashflow--might work better.

3 Be repetitive

"I always ask people, in any situation: '... and what's the effect on cash?'," says Hinder. "The way you refer to it can help. Every time you're having a conversation, from the board to the shop floor, don't just refer to 'stock' -talk about the 'cash tied up in stock' or 'cash tied up in debtors'. And state what amount it is. Refer to break even in terms of cash--'we need [pounds sterling]9m of cash each month just to break even'. It works."

4 Process is crucial ...

Every business has terms and conditions and most have a credit management process in place. But how many times are they overlooked in pursuit of a sale or because there's not enough time for the admin?

"New technology enables finance to get at the information about cash much more quickly," says CIMA's financial reporting specialist, Nick Topazio. "Real-time data on cash allows them to communicate with the sales team, for example, on exactly how they're performing day to day." It also means you can forecast...

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