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Become more competitive by establishing a cash culture_

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Where your cash is going determines where your business is heading. 

Prior to COVID-19, a cash culture was not a priority – businesses were looking at growth, top line, profitability and the PNL: instead of focusing on liquidity matters which (if ignored) can become drivers for business failure. 

Many large organisations including the government perceive working capital, cash and liquidity as functions that remain the responsibility of the finance team or CFO’s. 

However,  that is not the case. 

For example, if the operations team when discussing payment terms with suppliers, do not factor in the company’s working capital cycle, any action taken will put the business in a difficult position. 

Which results in the finance team being a recipient, rather than an active player in decision making outcomes with Ops. 

Yes, when done right, embedding a cash culture within all layers of a business (from finance to operation and beyond) can add real value to the enterprise.

If you would like to initiate a cash culture, consider these three elements: 

Systematic Thinking 

The systematic goals & operations of an organisation should mimic that of the financial sector in order to drive financial success. 

Finance departments gather insight on where business can be improved by collecting the right data and focusing on analysing it and preparing reports. 

By replicating these methodologies throughout all operations, you can direct each function to operate under financial targets. 

Financially Informed Staff 

Working capital management can feel like a foreign concept for those not directly involved with financial operations. 

A cash culture cannot be implemented without involving operation managers or employees in the financial statements. 

So to create a corporate culture that supports working capital management, you need to be willing to share financial information (at your discretion) with staff members that directly impact cash performance. 

Some organisations offer incentives or compensation for management by creating a buy-in on the companies financial success. 

By embracing financial awareness and discipline, you will embed strategic cash preservation and optimise decision making throughout the organisation – saving costs and reducing risks linked to liquidity. 

Optimised working capital procedures  

Once staff have embraced a culture of financial education & responsibility, you may begin to implement working capital optimisation procedures. 

Begin by defining which working capital levers drive cash flow and can be optimised by working capital management: accounts payable, accounts receivable, inventory and capital expenditure. 

Define tactics to free up cash trapped on the balance sheets and create processes with the roles and requirements that can be replicated and scaled. 

Operations functions can focus on budgeting, forecasting and financing and indicate how to handle cash activities like collections and payment. 

By implementing a cash culture, you will help instil the financial goals of your business and keep staff on track to achieve your goals and financial health. 

These three elements will kick start your journey to establishing a cash culture throughout your organisation. 

At CRESCO Accounting our firm of accountants are positioned to provide you with valuable advise and tactics on how to achieve this. 

Contact us for bookings and other accounting services [email protected] 

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