Create a cash conscious culture

In the face of general market disruption across different industries, businesses are feeling the effects of an uncertain market with restructuring activity rising and the 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 should make decisions impacting cash.

Businesses need to gain greater visibility and a reliable view of their cash flow position, look closely at their broader banking and financing relationships, and ensure that they can access and conserve cash despite challenges. This disruption may continue into the future and impact a greater number of businesses across a range of sectors, providing a timely reminder to act now, and harness 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 and offered under more stringent terms, it's typically 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?

We’ve developed five no-regrets actions businesses can take to optimise 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
   • Cash reporting and incentivisation, tailored to audiences across the organisation
   • Management of taxation liabilities
   • Centralising management of true cash availability
   • Effective management of banking and other financing facilities
3. Forecasting cash and appropriate 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. Cash flow management remains high on the agenda. As more shocks are anticipated, improving cash flow management through this period is crucial.