5 Questions to Drive a Cash Culture During Economic Uncertainty

Times are changing, and so are the roles of credit managers. Beyond what is traditionally expected of the credit manager, the role is expanding to become something more like a ‘revenue manager,’ and this shift will have many impacts on business as we know it. For some this is a small shift, but a significant one regardless. For others, this is a massive stride away from being the debt collection department!

Job titles often change without much real significance. This shift requires credit managers to oversee end-to-end global processes and simultaneously manage the stakeholders involved at each stage of those processes. If credit departments are to truly drive success, they need to extend collaborative working relationships with the sales department, and with the customers to whom they sell. Such a change necessitates an accompanying shift in mindset and culture—towards what I like to call a “cash culture.”

For many organizations, cash has been easily accessible over the last ten years. During the pandemic, the threat of cash becoming scarce resulted in cashflow rising to the top of the agenda for the C-suite, in particular the CFO, at almost every organization. Against this backdrop, companies turned to tactical methods to maintain oversight over cash. For example, many businesses set up ‘war rooms’ for cash to track cashflow status and cash coming in from customers on a daily basis. 

Cashflow has remained at the very top of the agenda post-pandemic. In fact, according to a recent global survey we conducted at BlackLine (Eye of the Storm: F&A’s Role In Responding to Instability & Volatility, 2022), 62% of C-suite and finance professionals believe that understanding cash flow in real time is going to become more important for their company over the next 12 months as the world continues to face economic uncertainty.

Despite this, only 2% of C-suite and finance professionals surveyed stated that they feel confident in the visibility they have over their cashflow.

This is why creating a cash culture is so essential. A cash culture is one that moves visibility over cash from a tactical or operational task to a strategic one, which highlights to all stakeholders—including sales, operations, and marketing—that cash is truly king.

• Unanimous understanding that being paid on time impacts not only working capital but profitability. Credit managers can drive this by educating stakeholders about how accounts receivable processes impact the success of the business.

• Involving all key stakeholders in the end-to-end process, ensuring optimised cash collections. This involves sending invoices out quickly and accurately—for example, ensuring all charges are as agreed rates with the customers. This means the CRM needs to be in sync with the billing system to prevent invoices going into dispute, thus slowing payments down. This also involves a common understanding from all stakeholders that extending payment terms comes at a cost—the longer the debt is to be paid results in a higher cost of finance, impacting cash flow and profitability. Finally, it means disputed invoices are quickly resolved and collectable, and most importantly that being paid on time is expected – and everyone works together for that goal.

Are my processes designed to drive actions for success or to fix the challenges created by the ERP?

Throughout the pandemic, every business had to adapt to new and unfamiliar circumstances in order to keep their head above the sand. In many cases, this meant adding extra processes to support finance teams and customers. While these processes were added with the best intentions at the time, are these additional processes still creating more efficiency?

Now that new ways of working have been established—often with a hybrid style of remote and office working—we need to shift our processes to reflect that. Ask yourself what your current processes are for, which are necessary, and whether they are increasing efficiency and productivity in the new normal. Can any of these processes be automated to enable your teams to focus on adding value? Reviewing processes post-pandemic is essential if credit managers are to enable the cash culture needed to support their changing roles.

Processes should be consistently reviewed to find better ways of working.

Successful departments must be underpinned by effective stakeholder engagement. Now more so than ever as the role of credit departments has expanded to incorporate a wider range of global processes and stakeholders.

Do you know how each one of your stakeholders contributes to your success? Consider putting together a RACI plan (a matrix of those who are Responsible, Accountable, Consulted, Informed), to determine which stakeholders are the most relevant and how you can measure your engagement with them.

Which ones impact the success of the AR key performance outcomes? Do they understand how and why it impacts them?

In my experience, when a win-win scenario is created, it comes from understanding how different roles impact one another’s success. This is when business partnering is at its best.

Every organization should have a credit policy—but this doesn’t mean they do. In many cases, it is something created to tick a box for a target operating model, but never actually used in earnest, which is a missed opportunity.

If you want to drive a great cash culture, sales, ops, and credit should all be aligned, working towards the same framework, with the customer at the center. Problems arise when sales have one policy—the purpose of which is to sell as much as possible—and credit’s policy naturally is to reduce debt, which means not selling to customers deemed too risky. This can mean that the two functions don’t communicate and are therefore not aligned.

In the challenging landscape we are in today, we face the necessity to sell. Many times, this will mean selling to customers who do not fit our ideal credit risk appetite. The key is to agree on an aligned policy, which establishes the appetite for risk up front, rather than creating challenges on a regular basis, creating friction in working relationships. 

What you measure is what you get, as they say. It is crucial to carefully understand what you are measuring and why, especially in periods when demonstrating successes is more frequently relied upon.

Often in organizations, we only measure our outcomes, not the method taken to achieve those outcomes. It’s time to review all of the leading measures in your current processes, rather than focusing solely on the lagging measures. Furthermore, automating processes and making their analysis easier is a reliable way of measuring every element of your processes, not just those that seem most obvious.

Noah didn’t wait for the rain to come to build the ark. Preparation is essential before times of crisis, not when they arrive. Crucial to this is having a clear roadmap to guide you through difficulty.

Without a roadmap in place, it is easy to fall into survivor mode, doing what you can simply to keep going. Ask yourself:

• Which points on my journey do I need to understand before reaching them?

• What will I automate and how will I improve processes?  

• How will I keep my key people?

• How will I attract the right talent?

According to research we conducted at BlackLine (Generation Future Finance, 2021), a quarter of C-suite and finance professionals believe that legacy technology and processes are making it difficult to attract talent. Offering up-to-date technology and processes was found to be more important to potential candidates than offering a competitive salary. Furthermore, when asked about the biggest negative impact on finance employee retention, respondents identified the three main biggest challenges as:

1) No opportunities to learn new skills because transactional work takes up so much time (28%)

2) No time to focus on future career development (26%)

3) Becoming bored with the mundane, repetitive nature of the job (26%)

Consider how you are incentivizing your people to stay. Nobody leaves college with the goal of data entry. In fact, according to BlackLine research, 2 in 5 C-suite professionals believe outdated perceptions of F&A roles, as defined by mundane data entry tasks, are stopping people from starting careers in this field.

Changes in our function have led to credit and AR professionals having the opportunity to become data analysts. People want to use their brains and add value to your businesses. Automating your processes allows for this by removing the need to spend time completing long, potentially mundane tasks and creates opportunities to for growth, both on an individual and company-wide level.

Once a roadmap is in place—supported by automated processes that bring value to work—staying aligned to your goals is far more achievable.

There are many challenges coming, in particular for those at the forefront of ensuring businesses retain the right mindset. In asking yourself these five key questions, the important takeaway is to understand what is within your control.

I once heard an Olympic champion say that he couldn’t control winning the medal—which he ultimately did achieve—but he could control running the perfect race. Know what you can control and what you can’t and ensure you have the visibility and understanding to know which is which. You can control your processes, what you measure, your roadmap, and the engagement of your stakeholders.

We manage risk. We cannot eliminate risk, but we can transform how we work to reduce the threat of risk. Now is the time for AR and credit professionals to demonstrate their skills and those of their teams.

This article was also published in the Credit Research Foundation's Quarterly Perspectives newsletter.

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