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Establishing A New Cash Culture

We all know that the sign of your business doing well is a healthy cash flow. But what’s the trick to keeping the business bank balance looking good? The answer: a cash-focused culture.

What is a cash-focused culture?

It might sound obvious, but businesses with a cash-focused culture don’t lose sight of the money going in and out of their company. Rather than simply looking at earnings, in companies with a cash culture, end-to-end cash management is the kingpin of the finance strategy.

A cash-focused culture doesn’t ignore the little things that can add up for a business, like expenses. You’ve probably seen a decline in the number of expenses being processed over the last 18 months of home working – in fact, if you didn’t find this, you’re definitely in the minority, as a recent report by Access found, in the UK expense claims dropped by 66% since the start of the first nationwide lockdown in March 2020. There was also a massive £350 ($485) decrease in value for each claim and a 53% reduction in the number of people making expense claims.

However, as employees start to return to office-based working and travelling to meet clients, your expenses are likely to return to normal levels in the next few months – which could lead to significant cash flow issues if you don’t keep on top of it.

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How can a cash-focused culture help your business?

Many businesses felt the impact of not having a cash-focused culture when the COVID-19 pandemic hit. Faced with closures and reduced revenue whilst still having to pay staff, rent an office space and keep the lights on, some businesses without a strong cash management focus, unfortunately, faced permanent closure and bankruptcy. Companies with a cash-focused culture pre-pandemic were better able to weather the storm.

A strong cash position is also important for future growth. Businesses with good cash management will have more options for both debt financing and borrowing, leading to lower rates and an overall lower rate of borrowing.

Whilst many finance managers will have been prompted by the COVID crisis to reevaluate business spending habits and identify areas for improvement, it’s important to remember that cash culture isn’t just for pandemics. Once life and work return to normal, it could be easy to slip back into old habits but if we’ve learned anything over the last year and a half, it’s that we never know what’s just around the corner. Cash flow management should be top of the agenda for businesses moving forward to ensure that, after making it out of the COVID pandemic relatively unscathed, your business doesn’t fall victim to its lack of cash-focused culture.

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How can you encourage a cash-focused culture?

Traditionally, many businesses have relied on monthly, quarterly and annual reports looking at what money has moved in and out of the business. This sort of reflection serves its place, and it’s important to understand what’s happened in the past and the lessons that can be learned from it. But it doesn’t help you to predict what will happen in the future.

That’s why cash flow forecasting is crucial to creating a cash-focused culture. Float gives you an accurate picture of not only your past cash flow situation but also what it looks like in the present and the future, so you can plan for every scenario and make more informed business decisions.

It helps you to keep on top of things like expenses so there are no nasty surprises, and you’ll be able to see if there are any areas in which you’re overspending. The budget vs actuals report in Float allows you to see at a glance if you’re spending more than you’d budgeted for in any given area of the business.

And of course, the business can’t move forward with a cash culture if you keep this information confined to the finance department. Luckily, it’s easy to share the most important information with your leadership team thanks to downloadable PDF insights that can be easily understood by anyone (yes, even for those who aren’t financial whizzes).

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Whilst it’s important for the C-suite of any business to have a clear view of the cash flow situation, very little is likely to change if those doing the day-to-day work aren’t mindful of the cash that’s going in and out every day. A good cash culture starts at the top, not only demonstrating the importance of cash by practising what they preach, but also by showcasing how cash can help a business to be more resilient, and how it helps future growth.

Some businesses set up a weekly or monthly meeting with department leads to give an overview of the cash situation to enable them to make better spending decisions and reduce expenses in line with company cash constraints. Once again, those easy-to-understand cash flow graphs can help to get the message across so that everyone in the business, from the newest employee to those at the top, are all on the same page.

Want to try Float out? Get a free 14-day trial and start building your new cash culture today.

Louise Bayley-Boyd

Digital enthusiast, passionate about helping small businesses survive and thrive.