Cashflow Management
Cashflow Management

Managing Cash
Cash management is one of the most direct ways to reduce wastage and inefficiencies in the business, optimising funds available for investment and reducing interest costs.

Improving cash flow can have immediate results in terms of improved credit ratings and higher business values. With lenders now firmly focused on cash flows, it is important for business managers to understand the cash cycles within the business and to manage their cash effectively. By doing so the need for external finance can be minimised and the likelihood of sourcing additional finance, where required, can be maximised.

When businesses look for ways to improve their cash flow, the focus is most commonly placed on delivering benefits from improved working capital management. This is a key component but can often be a quick win as opposed  delivering sustainable results . The squeezing of customer credit terms or stretching of days’ payable outstanding may help in the immediate term, but are unlikely to deliver lasting cash flow improvement unless undertaken as part of a wider cash management programme.

The Key to Sustainable Cash Flow Improvement
To deliver sustainable cash flow improvement, business managers need to go back to basics and start to think about how to manage the business more around cash. There are four key areas that form the foundation of sustainable cash flow improvement:

• Accurate cash flow forecasting and monitoring
• Timely and fit for purpose management reporting
• Key Performance Indicators implemented and measured
• Targets and incentives aligned across functions
• Clear roles, responsibilities and ownership of cash

As simple as these may sound, in practice they can prove challenging. The key to success in these areas is to ingrain a cash culture within the organisation.

Changing from a profit focus to a cash culture can take a long time and is by no means an easy task. To succeed requires sponsorship and full commitment from the very top level.

However, cash isn’t only the responsibility of the treasury or finance department – controls and incentives need to be put in place for use in driving behaviours across the business. It is essential that, when initial cash gains have been achieved, clear long term objectives are set to ensure the focus on cash remains.

Cash needs to be incorporated within the strategic decision-making process of the organisation and cash management has to become a normal daily activity and the responsibility of managers across the organisation if lasting success is to be achieved.
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Survival & Growth of your Business
Liquidity, cash and working capital are keys to the survival and growth of a business. More than ever before, Irish businesses need to manage cash and related assets and liabilities in an efficient and cost effective way in order to optimise liquidity, improve profitability and respond to ever changing market conditions.

For a financially distressed company, cash release or preservation may mean survival. For a non-distressed company, cash released can be used to reduce debt, fund growth and investment or provide a better return to stakeholders.

Whether a business is facing a cash flow crisis or simply wants to improve its working capital cycle and cash flow, we can help in many ways, including through:

• Developing robust cash flow forecasting processes and controls
• Analysing immediate and near-term funding requirements
• Stabilising cash flow and buying time for negotiation with stakeholders
• Identifying cash generation opportunities
• Reviewing working capital cycles and making recommendations
• Driving improvements in debt collection

For further details on any of our programmes contact:
gfrisby@frisbyassoc.ie
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