Improving Financial Performance With a Cash Culture - Part III
Part III - Technology and Cash Management
This four-part series was developed from the webinar How to Foster a Cash Culture and Improve Financial Performance. In each section below we have included a link to the video message provided by the speakers, brief summaries of the lesson and specific actions you can take to improve the cash culture in your business.
The webinar included Andrew Lee, the CFO at RealWear; Brian Jorgensen, the Treasurer at Bose Corporation; Timothée Clément representing Agicap; and Steve Rosvold, the founder of and Chief Learning Officer at CFO.University.
Here is Part III:
Leveraging Technology for Superior Cash Management
Brian Jorgensen, Treasurer, Bose Corporation
Emphasizing Online Sales Channels for Improved Cash Flow
At Bose Corporation, the web presence has been crucial in facilitating better cash management. According to Brian, online sales channels enable the company to collect payments within three days, significantly improving cash conversion times. This strategy not only accelerates the cash collection process but also ensures higher margins compared to traditional sales channels with longer payment periods.
Action for CFOs:
· Advocate for the research into and expansion of online sales channels and prioritize their development.
· Research investing in e-commerce technology and optimizing digital marketing strategies to boost web sales. By focusing on web-based transactions, CFOs can enhance cash flow and improve overall financial performance.
Strategic Customer Selection Based on Payment Terms
Jorgensen highlights the advantage of targeting sales channels with better payment terms and higher margins. For example, selling directly through the web offers better cash conversion than dealing with large corporates like General Motors, which have extended payment periods and slimmer margins. This approach allows the company to swiftly turn over cash and sustain better liquidity.
Action for CFOs:
- Evaluate existing customer segments and prioritize those with favorable payment terms and margins.
- Implement a customer segmentation strategy that will identify and focus on profitable sales channels to improve cash flows and utilize funds more efficiently within the organization.
Transforming Cash Management with Technology
Timothée Clément - Agicap
Specialized Cash Management Tools:
Special cash management software complements traditional ERP and accounting systems, which are typically focused on P&L and historical transactions rather than real-time cash flow management. By connecting directly to bank accounts and ERPs, these products provides real-time visibility of the company’s cash flow. Additionally, they may support detailed 13-week cash flow forecasts and long-term liquidity planning.
Action for CFOs:
- Integrate specialized cash management tools with your existing ERP systems to enhance real-time visibility of cash flows. This integration will improve the accuracy and timeliness of cash flow forecasts, allowing for better informed financial decisions.
- Regularly review and adjust the cash flow forecasts to ensure they remain aligned with the company’s financial strategies and goals.
Enhancing Collaboration Across Teams:
Designing your cash management process to transcend traditional silos between departments is a big step in creating the collaboration required to grow your cash culture. Offering customizable dashboards that present cash performance indicators relevant to different teams as another good step. This facilitates improved communication and collaboration between finance, procurement, sales, and executive leadership. Another helpful step, provide real-time access to key cash flow data. These steps will all help foster a cash culture within your organization.
Action for CFOs:
- Foster a cross-functional approach to cash management by ensuring all relevant departments have access to and understand their role in the company’s cash culture.
- Implement cash management software tools to provide real-time cash flow data and dashboards tailored to the needs of various teams.
- Encourage regular inter-departmental meetings to discuss cash flow performance, challenges, and opportunities for improvement.
Simplifying Cash Management Through ERP Integration
Speaker: Andrew Lee, Guest
Implementing Automated Collection Tools
Andrew highlights the benefits of integrating automated collection tools within an ERP system. These tools streamline the invoicing process by sending automatic reminders to clients, reducing manual effort. The visibility and ease of use for both finance and sales teams enhance the overall efficiency of the organization.
Action for CFOs:
- Evaluate your current ERP system to determine if it supports automated collection tools or if additional integration is required. Choosing a tool that integrates well with existing systems is crucial.
- Implement an automated collection tools too significantly improve your cash flow by automating routine tasks and ensuring timely payments.
Prioritizing Integration Over Minor Functionality Issues
Lee emphasizes the importance of integration when selecting tools for cash management. A seamless integration with the ERP system can outweigh minor functionality deficiencies, as poor implementation can lead to larger problems. This approach ensures smoother operations and reduced complexities.
Action for CFOs:
- When selecting new tools or software, prioritize those with strong integration capabilities with their current ERP systems.
- Conduct thorough research and select tools that offer robust integration will minimize implementation issues and operational disruptions.
By focusing on integration, CFOs can improve overall efficiency without getting bogged down by minor functionality gaps.
The Evolution of Cash Priorities at AGICAP –
Timothée Clément- Agicap
Transition from Revenue-Centric to Cash Efficiency Focus
At AGICAP, the initial years prioritized revenue growth due to a strong backing of venture capital funds, which lessened the immediate focus on cash management. However, market conditions changed, shifting investor expectations towards cash efficiency and sustainable financial performances. This transition was smooth for AGICAP due to the high level of cash literacy among its employees.
Action for CFOs: Educate your teams about the importance of cash efficiency and integrate this mindset into everyday operations. This involves revisiting and adjusting KPIs, ensuring they reflect cash generation alongside revenue. By embedding cash efficiency into the company culture, CFOs can align their teams with market expectations, promoting a more sustainable financial strategy.
Importance of Cash Literacy Among Employees
AGICAP employees, especially in customer-facing roles, have been deeply trained in cash management and working capital optimization, contributing to a strong internal cash culture. This widespread cash literacy enabled the company to adapt quickly to changing market demands and prioritize cash generation effectively. The shared understanding of cash importance across all departments ensured that strategic shifts were smoothly implemented.
Action for CFOs:
- Invest in comprehensive cash management training for all employees, not just finance teams, to build a robust cash culture.
- Promote cross-departmental understanding and collaboration on financial goals, the company can respond more adeptly to market shifts.
Regular workshops and continuous learning opportunities will keep the entire organization aligned on the importance of cash management.
Come back next week for Part IV - Cash Management Strategies and Financial Discipline
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