“Enter the cash culture”: why and how to prevent for better healing?

January 13, 2020

Why and What is the « Culture Cash » ?

Originally, the “cash culture” is a practice coming from Anglo-Saxon countries and more precisely from the United Kingdom. The “cash culture” consists of putting cash back at the centre of concerns in order to improve it and ensure the good health of the company. The main objective is to raise awareness of cash management issues and problems so that everyone involved becomes aware of their role in optimising cash management.

During the economic crisis of 2009, many companies found themselves in financial difficulties with a significant drop in their liquidity levels. Many aspects of accounting have sometimes been neglected, such as cash flow and working capital requirements (WCR).

They had to start integrating a new dimension, that of communication, close to the operational staff to steer and coordinate actions and ensure that beyond their results, the war chest of cash is sufficient to support growth and guarantee the financial reliability of their organization.

The challenge of the “cash culture” and of the financial departments, which then position themselves as the conductor of the orchestra, is therefore to change habits, to disseminate a set of good practices, to implement them, to optimise them and to ensure that they are taken into account at all levels of the company: everyone has a role to play in bringing in the cash.

Establishing a “cash culture” also ensures better upstream and downstream control. Within this framework, and if all the means are given and the processes are coherent, all the company’s departments are involved, from management to accounting, including the sales, purchasing and logistics departments. In this way, better visibility and better forecasts are made possible with regard to payment deadlines, stock rotation or the financing of an investment. This collective approach, based on cooperation, allows to better know the profitability of the company and to improve it by implementing all corrective actions.

Finally, it is the entire organization of the company that will benefit from the establishment of this “cash culture” thanks to the decompartmentalization of functions and services. Exchanges become more cross-functional, objectives are shared and information is pooled to identify and activate new levers for cash generation within the various departments. Relationships between teams are strengthened and it is together that avenues for improvement or sometimes “punch-up” actions are envisaged, for example in the context of commercial negotiations, payment deadlines, advance payments on orders, customer credit, conclusion of framework agreements, etc., which must aim to secure cash inflows as quickly and regularly as possible.