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Accounting
16 Jan 2023
by Keith Godfrey

The art of Cashflow Management

Whilst we all know the old idiom of "cash is king", it is likely that the conversations being held around this subject in the current climate are even more acute. With supply chain issues, staff resource challenges, economic and political uncertainty; there are increasing pressures on suppliers and customers alike, with recent market fluctuations only adding to the uncertainty.

What is Cashflow Management?

Cash flow management is the process of keeping track of the money within a business. Cashflow Management involves the tracking of money into and out of a body to ensure that there is enough cash on hand to cover expenses, meet financial obligations, and support future growth and investments.

What Companies want is a balanced playing field to help them implement their strategy, whilst knowing their true cash position and being able to accurately predict this being key.

As a vital part of the business function, the accounts receivables teams are doing their utmost to deploy their efforts to support customers whilst collecting cash on time. Finance directors may be hoping for reduced DSO to assist other cash flows within the business.

But what if you could predict with certainty when you would get paid and know the DSO when you invoiced, whilst supporting your customers with flexibility; what could that mean for the overall strategy of managing working capital? So what tools are there and what is new, to help remove as many variables as possible so teams can more effectively manage a path through these times – please read on.

 

Planning

It’s not always how much you have but what you do with it – or more importantly what the cash can do for the business. Be this supplier management, discounts, investment, acquisition, transition or assisting a growth phase. Cash is vital but how do you plan in this market, and what is the lost opportunity cost of not taking the action – so many businesses had clear 2020 visions that were knocked sideways by Covid, and having gotten back on track can’t allow any renewed post-Covid plans to be delayed again.

No doubt the skills of Finance Directors have been further sharpened through covid, Brexit and supply issues fluctuating. A robust forecast, with timing of critical amounts in and out should help steer a course in this market, particularly where some of the usual routes to funding are less available, flexible or more expensive now.

But what happens if a core customer pays later, what happens if goods arrive late, costs are increased and access to funds is reduced. And how do you still drive additional sales in this market, where credit may understandably be reluctant to increase limits as before. The variables in that forecast can be significant. Late payers, which may have usually been good payers, can be placed on stop, credit managed down etc but is that the best long-term strategy if these are good underlying customers that just need support.

 

Financial Strategy & Solutions

Clients can reduce costs dramatically by utilising automation, ensuring e-invoicing is received, managed and paid thus bringing forward DSO. Resources can be better managed, including those working remotely and overseas and meeting compliance needs across jurisdictions. Traditional options for funding cashflow remain available although may be less flexible but innovation would help bridge the gap.

There is now a straightforward solution that ensures invoices are paid to terms every time, whilst allowing additional Extended Payment times for your customers too. Assisting their cash flow at difficult times to help drive sales growth and loyalty, whilst providing better DSO that is exactly known to assist accurate planning – and without risk. This is one solution to help manage cash flow and drive sales that is new which proves that difficult times do drive innovation.

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