What you missed at EI's Cashflow Management Event

Below are my notes on the key messages from each speaker at out recent Cashflow management event; Slides of the presentations are available  at www.enterprise-ireland.com/financeforgrowth

1. Managing Cash Flow: A Practical Guide to Effective Financial Management

Brendan Binchy and Alan Fahey of ROCG, business consultants, focused on a Key Message  throughout the morning:

What Gets Measured, gets managed, what gets managed gets done.

Some other key messages are :

  • There are only 4 ways to get more cash into your business – increase turnover, improve margin, make better use of assets and leverage other peoples money
  • There Are 3 Key Financial Indicators Of Your Business’ State Of Health and in order to make money it must simultaneously increase Net profit margin, Cash flow & Return on investment (ROI)
  • A business cannot grow faster than its cash flow allows – understand your business’ maximum sustainable growth rate
  • Management must be able to easily obtain and use timely financial data which assists a business in making money
  • Proper planning reduces business and financial risk, key performance indicators (KPI’s) can help identify where your business is making money and where it is haemorrhaging it
  • There are 100’s of generic KPI’s – Identify ones that mean something to you and your business
  • Cut costs intelligently – cut cost with care as failure to invest in people, marketing and technology can leave you falling behind your competitors
  • You can easily compare your business against your competitors – calculate the KPI’s you use on their historic information e.g. ROI, Productivity per employee, etc
  • You can never make it too easy for customers to pay you
  • Understand who your most profitable customers are and which products are the most profitable
  • When financing capital expenditure, match the asset life to the funding cycle
  • Adopt a culture of cash preservation, cost control and fervent productivity

2. EI Client’s Practical Experience of Preparing Cash Flows and Tips for Improving Cash Flow

Declan O’Boyle, CFO, Rainmaker Business Technologies Ltd stressed the importance of cash management for his firm as most receipts and payments are not in euro and therefore require very careful management to ensure that they are matched as far as possible to limit FX exposure.  He emphasised that you do not need a sophisticated and expensive computer system – they use a simple spreadsheet for cash planning and management.    He outlined very practical recommendations based on their experience:

  • Know your customers.  This includes understanding the contact points and approval process they have, including when they have cut-off points for payment.  Know which are your priority customers and give them particular attention.
  • Proper and timely documentation is essential.  Invoices should be prepared immediately based on the dates agreed in advance with the client.  Ensure that there are clear descriptions and relevant information on the invoices.
  • Agree payment dates and contact the client (in an appropriate way) shortly before that date to ensure that payment will be made as agreed.
  • Incentivise staff, including delivery and sales staff, to support cash management.  The €250 BIK exemption can be used to show appreciation for staff effort.
  • Cash management is an essential agenda item at management’s weekly meeting.

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