Many businesses are feeling the squeeze on cash, and relying on their finance department to help. They're looking in the wrong place. The first step in solving a cashflow squeeze is to get rid of the idea that it's the finance department's job. This is why:
Finance can't collect cash. A software customer won't pay because 'the FX widget doesn't interface properly with the Omgeo gadget'. A consultancy client won't pay because they don't think the job needed the 20 days charged for. Or a printing customer is annoyed by the late delivery. Whether it's a discount or just an apology that's wanted, all these issues need to be sorted by someone outside the finance department.
Finance can't control stock levels. If production wants to produce for stock, or purchasing wants to buy six months' stock because that's the minimum order quantity the supplier will entertain, then cash will be sucked into stock. Managing with lower stock levels needs a change of supplier, a rationalisation of the range, or a change of production policy. Finance cannot on its own mandate any of this.
Finance can't delay payment to suppliers. Well, maybe it can a little, but it is soon self-defeating. If you become a notorious late payer you are everyone's least favourite customer. You are last in line when it comes to fulfilling orders, or subject to unpredictable delays when your suppliers put you on stop. This just means you have to carry even more stock to maintain continuity of operations.
So who can manage cash in a business? Everyone. Everyone can cause problems, and everyone can solve them. The finance department can educate, co-ordinate and mobilise, but on its own can do little.
Alastair Dryburgh is head of Akenhurst Consultants - www.akenhurst.com