The Cash Flow Practices

Before talking about the importance of cash flow, I want to point out the difficulties in doing so. We have found similar problems in most companies, not depending on the size or segment in which they operate.

In order to have a reliable cash flow, it is necessary to meet certain requirements, without which we will only have a pile of numbers without a nexus, and its use as a management tool can lead to serious errors.

As the very first topic, which has brought great problems, are the people who make up the financial team of the company. Normally, they do not have preparation, do not know how to prepare the report, even less know the dynamics of the processes that are used in its composition. The team should know the department’s routines, such as accounts payable, receivables, cash and banks, and a strong training in the information system that the company uses.

Good information systems have functions that deal with cash flow, which is not used most of the time. It is common to hear, that the system does not work, and that the software provider does not give proper assistance. The problem is not usually in the tool, but in the operators.

The financial team must be capable, with well-defined routines, and constant training. Unfortunately, it is practical to find more people than necessary by doing repeated tasks and failing to generate the necessary information. If these factors are happening in your organization, it is time to get help, and review the procedures, people, and processes.

On the importance of cash flow, I have to say, that your analysis is so fundamental, that it is impossible to manage and get good results without it.

Through its daily use, one can define the future moments, and here it is to say that cash flow takes care of the future of the numbers and not of the past, moments that can be good, with leftovers, or bad, with financial deficit. It is the perfect report, to implement purchasing and payment policies, financial investments, investments, and renegotiations.

With the numbers aligned and reliable, you can bring together the purchasing, sales and production team, directing the operation, to avoid unpleasant surprises.

Together with the annual budget, financial, managerial and monthly financial closures, and costs, managers have the necessary tools, provided by the controller, to make decisions in the right direction, charting and correcting the business route accurate and efficient.

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