It’s time to create a new culture in pursuit of cash excellence
At the start of the COVID-19 crisis, many businesses reacted quickly to stave of the imminent crisis and keep their businesses alive and kicking. Measures in some cases were drastic and a reflection of just how ‘unknown’ the looming situation was.
With a drop in demand across many sectors, cash preservation was high on the agenda with cuts to capital expenditure, dividend payments, external spend, even mothballing their business. Couple this behaviour with the government stimulus which followed and many businesses are now sitting on sizeable cash balances, possibly in a way that many have not experienced before.
Some of this cash can be attributed to business leaders’ quick thinking but few can argue the benefits of the cash injection of Bounce Back and CBILS loans, furlough claims, delayed tax payments etc. But what many business owners have realised is just how much freedom comes with having cash in the bank and in order to stay in a good cash position, lessons need to be learned about the importance of striving for long term cash excellence.
It’s time to shift our attitude to cash and create a new culture
As government support reduces, for example with the furlough scheme coming to an end, and businesses look to increase output, there is a small window of opportunity for business leaders to change their team’s behaviour around cash, and focus on ‘excellence’ for the long term benefit of their businesses.
Having adopted some immediate measures, it’s time to look at which of those measures is sustainable or can become sustainable to create a long-term focus on cash excellence and how those measure permeate every area of the business.
This is about root and branch change from the finance team balancing the books, to accounts teams making payments and warehouse managers making purchases to adjust their mindset and rethink how they act to enable prudent cash management. To achieve true cash excellence you need to look at your people and your processes.
Your culture starts from the top down and businesses who regularly communicate with their people around the plan, vision, numbers are generally more successfully than those who play their cards close to their chest. So if you’re trying to create a strong cash culture, your people need to understand that cash flow is as important (if not more important at times) as the bottom line. Not simply in the context of surviving a pandemic, but also in terms of your company always being in the strongest possible position to thrive, to acquire, to expand or achieve whatever your objectives are.
It’s not just about changing the rhetoric and turning up the volume, it’s about educating people and giving them the tools to make better decisions for the business and understanding why. Sales people are often incentivised to win new contracts or sell products and then it’s left for the finance department to collect the money in. How different would cash collection be if sales teams were incentivised on the terms they agree and a reduction in debtor days.
Think about how you can change your team’s attitude to cash?
“For better or worse, cash is the oxygen of your business, and you can’t last long in any environment without it” – Neil Blumenthal
So once your team has a good understanding of the importance of cash in terms of the business achieving its goals, you need to give them the tools with which to make it happen. This involves looking at all the areas within the business and identifying the main areas of cash management.
By looking at the four main areas, you will undoubtedly find quick wins that require simple process changes and others which might require a little more heavy lifting and will need careful planning and implementation. But remember the reward is usually worth it.
We cannot reiterate enough the importance of a healthy cashflow – not just to get you through a crisis, but to accelerate you out of one too and to help you thrive through the good times. If you would like some help with achieving cash excellence in your business – not just for now but for the long term – we have developed a process which can help you do just that. Find out more..
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