More than ever, cash management is the lifeblood of any business. Without available cash, they may find it difficult to negotiate financing from a bank, raise funds from a partner or build up sufficient stock to meet their orders.
However, the finance department is not the only one involved in cash management. All company departments need visibility and control over outstanding receivables, invoice payment status and related communications. So how can you optimize your cash flow while involving your employees in a common financial objective?
One solution: instill Cash Culture!
What is cash culture?
Cash culture, or financial culture, is a collective mindset focused on the company’s cash flow. This comprehensive, in-depth approach goes beyond the simple notion of profits to become a fully-fledged indicator of a company’s performance and financial health.
The cash culture thus corresponds to a new organizational mode, thanks to the implementation of tools for optimizing cash flow, credit management, inventory management and, ultimately, profitability. Charles Durand, Engagement Director at KPMG France: “. From now on, [l’entreprise] must build and manage robust cash flow forecasts. But what’s crucial at this time is that it’s done collectively, i.e. with the operational staff who have the most up-to-date information on the business, so that it can be constantly adapted, hence the importance of developing a cash culture which implies that every employee is involved in improving the company’s cash position. “.
Developing a cash culture enables a company to completely rethink its organization and structure, involving employees at all levels in financial management.
Now that the cash culture has been defined, discover 3 reasons to develop it in your company:
#1: Optimizing cash flow
Without available cash, it’s impossible for a company to meet its day-to-day financial needs (inventory purchases, investments, employee payments, etc.). In the long term, these issues can make companies vulnerable.
Cash management and monitoring must therefore be the subject of increased vigilance. In this way, instilling a cash culture can anticipate sensitive financial situations and provide the means to prevent difficulties from arising in the first place.
Each extension of payment terms or inventory duration inevitably has an impact on the organization’s liquidity. In this way, credit management and debt collection are the main challenges of the cash culture. In fact, managing payment terms is a real lever for optimizing cash flow: on the one hand, managing receivables, and on the other, negotiating longer payment terms with suppliers.
#2: Establish an overview of the situation
To guarantee the development of your company’s business, you need to accurately determine your cash flow requirements, taking into account potential risks and unforeseen events. A complete audit of incoming and outgoing cash flows is therefore essential from the outset. This helps to identify sources of liquidity, before implementing the necessary actions.
Where credit management is designed to assess risk, then control and optimize payment management, making all employees aware of this task makes it easier to detect cash bottlenecks in certain departments, and to take corrective action where necessary.
The aim of developing a cash culture within the company is therefore to take regular stock of past and forecast figures, in order to gain a clearer picture of the company’s finances and any corrections that need to be made.
#3: Involve all employees in concrete ways
Collective effort is what cash culture is all about! Making all teams aware of the importance of their role in the health of the treasury helps to increase motivation:
- Constantly striving for better results
- Involvement in a common goal
- Reassurance about the company’s future and job security
In this way, training may be necessary to familiarize staff with the vocabulary of cash management, especially those in key positions such as negotiating payment deadlines or debt collection (sales department, accountant, etc.). This support is essential to emphasize the importance of cash culture and the positive impact it can have on the company.
Rely on a partner who knows your market. The Smart Collection by CentralPay solution is designed to provide end-to-end control of customer payments and debt collection, giving you a real boost.