December 5

The Cash Efficiency Cycle and your Business Software


An area of great concern to most business owners is that of cash flow management and optimization of and improvement in the velocity of incoming cash against adding drag to the outflow of cash (slowing the outflow). Some call this the light version of Cash Efficiency Management but as I have found through research on many of the CFO related sites the definition is vague at best since many professionals have their own idea of what makes up Cash Efficiency as it relates to their business.

One thing is for sure and that is the software you run your business on can help or hurt you financially from a cash management position if it isn’t fully integrated, if it has bad or inaccurate data, isn’t utilized the way it was designed to be used (workarounds), has people who are not fully trained or training is not formalized (including continuous retraining and process improvement) and is not culturally accepted as the system of record.

A software solution that has none of the above traits succeeds in helping understand the cash cycle by not only providing accurate and timely information that is key in making short term and long term effective management and financial decisions but also providing key trend data that isn’t visible otherwise. The ability to see if vendors are typically late or early helps make “when to order” decisions. These decisions on key timing of products (hence money in the bank) are much more transparent and less risky to business in terms of shortages or interruptions.

Customer’s predictive patterns of collections helps you smooth the bumps in your own cash flow helping with better timing of key purchase or investments. MRP gives you visibility to when things are needed from a time phased perspective. It takes into account the lead time and when it’s actually needed to fulfill the order. Buying Patterns tell you what to buy or build.

The bottom line is this. If you’re looking to improve your financial efficiency your business software has to function like it was designed. Too many clients we see have bits and pieces working but have abandoned the project before it is competed. Sometimes it takes building out a second phase then putting a plan in place to do it! List the items unfinished or remaining to be completed. Put together a team and assign a project leader and finish what you started.

It seems many clients take an amazing amount of time to build manual workarounds but invest little or no time to fix or finish their software implementation (or they inherited it that way). An unfinished software implementation sends a message that a company is weak. Either it can’t make time to fix the most important tool a business has, doesn’t have the right people to figure it out, isn’t willing to use outside help to fix because it isn’t a high enough financial priority, has cultural issues and/or leadership issues. In the end it makes it look like the leadership is weak. How can it not be important?


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