Keeping control of your cash

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When the availability of credit is impaired, lenders will look more closely at a company’s risk profile before making the decision to lend or to renew a finance facility. Companies may find that cash becomes more difficult to manage, but even in a credit crunch environment, opportunities exist for businesses to stay ahead of their rivals by doing the simple things well. Staying in control of your own business destiny depends upon three things:

• Transparency - don’t overload management with information. Identify your key performance indicators and focus on them. Understand what the data you have is telling you about your business.
• Ownership - only the Board of Directors can have a comprehensive view of the business. Individual departments may have competing demands, but the Finance Director must manage and balance the whole.
• Communication - once communication breaks down, trouble begins. Communication with all stakeholders is vital if management is to stay in control. Lenders dislike surprises, suppliers need to know when they will be paid and customers need to pay on time.

All this may seem like common sense, but our experience in the market tells us it isn’t always common practice.