In the face of general market disruption, geopolitical change and high profile challenges across different industries, businesses are feeling the effects of an uncertain market with restructuring activity rising and risk of shocks remaining in the market. Creating a cash-conscious culture is critical to ensure organisations can improve and accelerate their resilience to mitigate the impacts and flourish in the future. To achieve this, everyone in an organisation needs to be focused on cash. This is a collective responsibility from the boardroom and across the business - not just the finance team or treasury to make decisions impacting cash.
As these issues are thrown into the spotlight - especially as banking sector contagion continues - businesses need to gain greater visibility and a reliable view of their cash flow position, look closely at their broader banking relationships and ensure that they can access and conserve cash despite challenges. This disruption may continue into the future, impacting a greater number of businesses across a range of sectors, providing a timely reminder for businesses to act now, harnessing the full range of cash flow analytics tools to fully understand their current position.
With the availability of debt funding in the market being more expensive, offered under more stringent terms, and it being more difficult to raise both debt and equity funding, working capital remains the cheapest form of liquidity.
What are the top 5 activities that businesses can be doing to optimise their cash culture?
1. Make cash the business of everyone in the organisation. Cash is bigger than the treasury and finance departments; they both have a key coordinating role in effectively managing cash but it’s the operations of the business that are making daily decisions that impact cash. Push cash up everyone’s agenda.
2. Cash can mean different things to different people, so make cash relevant to everyone. Having a common language of cash across the organisation (operations and finance) is vital to instilling a proactive cash conscious culture:
- Reliable cash forecasting
- Effective expenditure management and tactical actions
- Cash reporting and incentivisation, tailored to audiences across the organisation
- Management of cash tax and government incentives
- Centralising management of true cash availability and foreign currency cash
- Effective management of banking and other financing facilities.
3. Forecasting cash and appropriately granular scenario planning on both a medium and short term basis should involve both operations and finance teams. These are essential in reflecting and understanding the real operational risks that exist in the current volatile market.
4. Understanding and sharing your minimum cash thresholds to help the wider business manage the daily decisions and cash commitments that they are making (once the decision is made, the cash is committed).
5. Optimising supplier and customer working capital terms and relationships to conserve and generate the cheapest form of cash available to you.
The underlying issues driven by current market headwinds continue to pose a challenge to businesses across the UK, with cash flow management remaining high on the agenda.
As more shocks are anticipated, improving cash flow management through this period is crucial:
Our Liquidity Resilience Assessment tool can help you get ahead by assessing six fundamental areas of your organisation to identify the potential blind spots in your liquidity ecosystem. Additionally it also recommends what you can do to ensure that your whole organisation is working to optimise and protect your cash position.
To receive a copy of the tool and specialist advice for implementation, please provide us with your details below.
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