Improving Financial Performance With a Cash Culture - Part IV

Part IV - Cash Management Strategies and Financial Discipline
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 IV, the epilogue in our series:
Streamlining Financial Performance: The Power of Daily Reports
Brian Jorgensen, Treasurer, Bose Corporation
Importance of Daily Reporting
Brian emphasizes the value of daily cash reporting, powered by tools like SAP, Power BI, and Snowflake used at Bose. These daily snapshots provide visibility on cash flows, investments, and overdue payments, driving accountability and improvements in metrics such as Days Sales Outstanding (DSO). This rigorous focus on daily insights ensures that financial data is always up to date and actionable, enabling faster and more informed decision-making.
Action for CFOs:
- Establish a routine for daily financial reporting, ensuring that critical metrics are monitored consistently.
- Invest in robust data analytics tools to streamline data extraction and presentation.
- Integrate daily reports into executive reviews to help foster a culture of accountability and prompt responsiveness to financial challenges.
Strategic Inventory Management and Vendor Relations
Brian also highlights a paradigm shift in inventory handling and vendor payment terms. By embracing stockouts and moving toward shorter product runs, businesses can enhance market buzz and reduce the financial burden of excess inventory. Additionally, make short vendor payment terms visible at the executive level has driven executive-level negotiations to improve payables terms, thus optimizing the Days Payable Outstanding (DPO).
Action for CFOs:
- Adopt a strategic approach to inventory management that balances stock levels with market demand, potentially celebrating stockouts to maintain pricing power.
- Ensure vendors with short payment term are identified and engaged in discussions for more favorable terms.
- Leverage your executive relationships to negotiate better payment cycles and improve cash flow management.
The Impact of a Strong Cash Culture on Long-Term Financial Health
Andrew Lee, Chief Financial Officer, RealWear
Importance of Managing Balance Sheet Elements:
Andrew highlights the significant role the balance sheet plays in strengthening cash culture within a company. By managing inventory, accounts receivable (AR), and accounts payable (AP) effectively, firms can avoid unnecessary capital raises. This approach ensures that businesses can leverage low-hanging fruits to unlock cash without affecting critical investments like R&D, Sales and Marketing.
Action for CFOs:
- Institute regular reviews of the balance sheet to improve on high inventory levels, outstanding AR, and low AP.
- Implementing strict cash management policies to ensure assets are efficiently utilized and cash flow is maximized.
- Establish a cross-departmental team focused on cash management practices can also enhance accountability and drive improvements.
Cost of Capital and Investment in Growth:
Andrew points out that capital for VC-backed companies is typically expensive, either through debt with unfavorable terms or new equity that dilutes current investors. By optimizing internal cash flows, companies can reduce dependency on external financing and mitigate dilution risks. This strategy enables firms to sustain valuable investments in growth areas like R&D without compromising financial stability.
Action for CFOs:
- Focus on internal cash generation initiatives to reduce the frequency of external funding needs.
- Launch efforts to streamline operational efficiencies and improve working capital management to free up internal funds for essential growth investments.
- Engage actively with board members and investors to align on long-term financial strategies that prioritize sustainable cash culture.
Leveraging Cash Management Software for Long Term Financial Goals
Timothée Clément – Agicap
Cash Management Software Enhances Resilience
Timothée emphasizes the importance of systems in fostering a resilient cash culture within a company. By utilizing cash management software businesses can ensure that their financial processes and values persist even when key personnel change roles or leave the company. This software provides a solid foundation that can be built on to establish first class cash management practices.
Action for CFOs:
- Implement cash management software that reduces time, errors while improving the transparency in how cash is moving through your business. Ensuring this infrastructure is in place helps new leaders adapt quickly and maintain financial discipline.
- Review and update the software to incorporate new features and maintain its relevance.
Accelerating Onboarding & Maintaining Cash Culture

The presence of a well-configured cash management system allows new financial leaders to quickly adapt and uphold the company’s cash culture, as key performance indicators and processes are built-in and easily accessible. This results in faster onboarding and instills confidence in maintaining financial stability. A robust cash culture ensures strategic alignment across the organization, even as personnel change.
Action for CFOs:
- Set up dashboards and KPIs within your cash management process, facilitating a smooth transition for new team members and better cash utilization for the business.
- Conduct regular training sessions to ensure all who have an influence on cash are up-to-date with the system. By doing so, you can maintain a cohesive cash culture that is strategic aligned with business goals.
Take a Strategic Approach to Cash Flow Management
Brian Jorgensen, Treasurer, Bose Corporation and Steve Rosvold, Founder and CLO at CFO.University
Leveraging Supply Chain Finance Programs
Leveraging supply chain finance programs can significantly improve cash flow management. By extending payment terms with vendors from 60 to 90 days and enabling them to finance these terms for less than it would cost them for shorter terms, both the company and the vendors can benefit. This strategic move utilizes the strength of the company’s balance sheet to enhance cash flow while potentially reducing vendor costs.
Action for CFOs:
- Implement a supply chain finance program by identifying key vendors and negotiating extended payment terms that are mutually beneficial.
- Establish relationships with financial institutions that can provide favorable financing options for vendors.
This approach will improve the company’s cash conversion cycle and strengthen vendor relationships.
Creating a Cash Culture through Goal Setting and Education
Creating a cash-focused culture involves educating the team on the importance of cash flow metrics such as DSO (Days Sales Outstanding). By setting clear priorities and quantifying the impact of improvements, for example, demonstrating that a single day reduction in DSO is worth $10 million, the entire sales organization becomes motivated to focus not just on booking sales but on collecting receivables promptly.
Action for CFOs:
- Establish clear objectives related to cash flow management and communicate the financial impact of achieving these targets across the organization.
- Conduct regular training sessions to ensure the team understands and is committed to improving cash metrics.
- Provide tools and reports to track progress and recognize achievements to maintain momentum and focus.
Building Financial Discipline: A Real-Life Case Study
Andrew Lee, Chief Financial Officer, RealWear
Reducing the Cash Conversion Cycle
Reducing the cash conversion cycle is a pivotal strategy for enhancing financial discipline within your organization. By progressively shortening the time it takes to convert resources into cash, companies can improve their liquidity and operational efficiency. This process doesn’t have a fixed limit, and continuous improvement can lead to significant financial benefits, allowing organizations to generate more cash even as they grow.
Action for CFOs:
- Evaluate your current cash conversion cycle and set incremental goals to reduce it.
- Implement process improvements and negotiate better terms with vendors to enhance payment schedules.
- Regularly review the cycle to identify further areas for optimization and
- Gather cross-functional teams to brainstorm innovative solutions to maintain momentum.
The Benefit of a Negative Cash Conversion Cycle
Achieving a negative cash conversion cycle is an advanced financial goal wherein a company receives payments from customers faster than it pays its vendors. This concept underlines the importance of efficient cash management and can significantly boost a company’s financial health as it scales. Many of the world’s largest companies operate with negative cash conversion cycles, highlighting their effectiveness in supporting business growth.
Action for CFOs:
- Benchmark your cash conversion cycle against top-performing companies to understand the potential for improvement.
- Focus on expediting receivables while strategically managing payables to move toward a negative cycle.
- Foster strong relationships with suppliers and customers to negotiate terms that support this goal, ensuring consistent monitoring and adjustment of strategies to maintain a favorable position.
If you missed the beginning of this series, here is a link to Part I - Building a Cash-Conscious Workforce and Culture
Identify your path to CFO success by taking our CFO Readiness Assessmentᵀᴹ.
Become a Member today and get 30% off on-demand courses and tools!
For the most up to date and relevant accounting, finance, treasury and leadership headlines all in one place subscribe to The Balanced Digest.
Follow us on Linkedin!