Elevate Your Company’s Cash Performance: 10 Essential Practices

In today’s volatile economic landscape, mastering cash management is essential for every company. CFOs and treasurers must prioritise a cash-conscious culture to navigate uncertainty effectively. This article provides 10 best practices for better cash performance, supplemented by a dedicated ebook to delve deeper.

1. Define Clear Cash Goals:

The first step in optimising cash performance is to establish clear and measurable goals. Identify the top three to five cash performance issues your company faces and select key performance indicators (KPIs) to monitor these issues. For instance, if accounts receivable is a concern, monitor Days Sales Outstanding (DSO).

Clearly communicate the impact of inaction and the benefits of timely interventions to C-Level executives, ensuring they understand even without a financial background. Use the Pareto Principle to prioritise efforts, focusing on the few critical factors that will yield the most significant impact.

2. Cultivate a Cash-Conscious Company Culture

A company’s culture starts at the top. The CEO, founder, or leading entrepreneur sets the tone for a cash-conscious culture. Embedding cash management into operational procedures ensures every team member understands its importance. This holistic approach makes cash management a core element of the company’s strategy, promoting long-term financial health and resilience.

3. Empower the CFO

The CFO plays a pivotal role in fostering a cash-conscious culture. They must educate employees about the importance of cash management, implement robust monitoring and reporting processes, and align financial goals with the company’s overall strategy. This approach ensures transparency, accountability, and long-term financial stability.

A few months before I arrived as CFO, one of our biggest competitors went bankrupt. They were profitable but had mismanaged their WCR. This showed everyone at GPG the importance of cash and made it easier for me to implement a cash culture in the company. - Guillaume Schaeffer, CFO of GPG Granit

4. Focus on Key Teams:

Identify and support key teams such as sales representatives and stock managers, who are crucial for revenue and inventory management. Provide them with the necessary tools, training, and support to boost productivity and efficiency. Organise regular cash committee meetings to engage operational staff, ensuring everyone understands their role in improving cash performance.

5. Turn Financial Flows into Economic Realities

Utilise available data to conduct thorough analyses, starting with operational data and then verifying with accounting. Identify issues, explain root causes, and measure actions over time. Communicate findings to key stakeholders, highlighting risks and recommending proactive measures to stay ahead in a changing business environment.

6. Increase Free Cash Flow

Implement strategies to enhance free cash flow, such as optimising supplier payment terms (DPO), improving customer payment terms (DSO), and managing inventory levels (DIO). Use tools like Agicap to automate these processes, reducing manual tasks and improving efficiency. Success stories, like that of Kaplan’s CEO, illustrate how these strategies can halve DSO, significantly improving cash positions.

7. Optimise Cash Surplus

Invest surplus cash in low-risk, high-yield financial instruments to maximise returns. Conducting monthly reviews of your short-term investments and reforecasts can significantly boost your financial income. Specifically, monthly reviews can result in a 10% to 50% increase in returns compared to quarterly reviews, and generate 2 to 3 times more revenue than annual reviews. Agicap Financial Investment Module

8. Share Actionable Reporting

Transparent reporting builds trust with stakeholders by demonstrating sound cash management practices. Regular reports keep stakeholders informed about the company’s financial status and cash management strategies. Compare current performance against historical data or industry benchmarks to identify areas for improvement and best practices.

9. Collect Feedback for Continuous Improvement

Regularly gather feedback from employees on financial practices and tools. Use surveys and informal engagements to understand their effectiveness and areas for improvement. Continuously refine processes to enhance financial visibility, prevent overspending, and mitigate risks.

10. Provide the Right Tools

Equip your team with a comprehensive cash flow management system like Agicap. This tool should be user-friendly, support collaboration, and offer real-time data access. Ensure ongoing support from internal or external experts to help solve financial problems and improve performance.

Conclusion

Imagine a company where every decision is backed by robust financial insights, turning cash flow into a strength rather than a concern. By implementing these strategies, you can drive your company forward, seizing opportunities and outpacing the competition. Lead with vision, embrace best practices, and transform cash flow management into a cornerstone of your company’s success. The future is yours to shape—make it extraordinary with the right methods and tools.

For a more in-depth exploration of these strategies, download our white paper on boosting cash performance.