Cash Flow and Corporate Performance Management: The Return of the King!

“Like good health, a positive cash flow is something you’re most aware of when you haven’t got it.” – Robert Heller

Given the central importance of maintaining a healthy cash-flow to all businesses, why is cash-flow so often an afterthought to Corporate Performance Management solutions?  After all CPM is intended to provide a holistic and coherent view of the intended and actual position of the business.  Yet all too often sophisticated CPM-based budgeting solutions exist alongside complex and error-prone spreadsheet-based cash management tools.

The King isn't Dead!

It's not as if cash management is unimportant.  The pressures caused by difficult economic conditions are being compounded by the fact that business structures and supplier relationships are more complex than they have ever been.  Investors are placing renewed focus upon corporate cash generation rather than more 'exotic' measurements of value.  And recent research shows that organisations that emphasise improving the efficiency of their cash collection processes consistently outperform their competitors and deliver greater value to their stakeholders.

A Strategic Approach to Improving Cash-Flow Management

Longer payment terms to suppliers and reduced credit terms for customers are appealing short-term solutions to cash-flow problems, but risk driving smaller suppliers out of business and alienating your customers.  A more strategic response will involve a number of elements:

  • Setting the right strategic priority for cash-flow management, giving it both priority and visibility
  • Redesigning financial management processes to fully incorporate cash-flow planning and management
  • Putting in place effective steps to improve cash forecasting accuracy
  • Maintaining consistency of focus on cash throughout the organisation

The CPM Response

Integrating cash-flow planning with your CPM solution means you can ensure your financial goals are aligned across revenue, profitability, asset management and cash-flow within a single platform.  A common set of policies and controls can be applied, simplifying maintenance and removing the barriers that often exist between the cash-flow management teams and other financial management processes.  In addition the inherently high-quality and intuitive reporting and analytical tools which are common to CPM platforms will be available to support your cash management tasks.