ISDS Performance Management

Downloads

Cashflow Management Blog: a Non-financial perspective

"Credit crunch" is the phrase on many business lips right now. SME's always struggle when times are tough because we are easy targets for Banks to 'control' their risk portfolio and are therefore most at risk from tight cash resources which ultimately often translates into a cashflow management crisis.

Cash is King!; having survived through an 'intensive care' process with a bank I don't need reminding of this as I bare the scars of this process and am well aware of the pain it brings. However, the initial knee jerk response of stripping overhead and cost; whilst an obvious option MUST be put into perspective with non-financial and strategic factors.

Too often the problem is made worse by this 'change' being imposed during tough times eg a recession, whereas issues such as efficiency, effectiveness, resource alignment, value management, fundsflow management, etc., are issues which should be managed on an ongoing basis via a properly focused performance management process ........ in good times as well as bad! Such change should not be an enforced reaction; pro-active management of such vital performance factors is good business practice at all times.

The simple fact is that many businesses are so constrained within the bounds of an annualised budgeting process that their performance management 'meetings' are most often focused solely on P&L and sales forecast to satisfy their budgets and 12 month plan. This often forces short term decision making with little if any thought to the alignment of resource with the key drivers of value within the organisation; particularly as these often relate to non-financial factors. Change decisions often then become financially driven 'bolt-on' initiatives without any clear understanding of long/medium term cause-effect outcomes or of proper alignment within the enterprise.

I think we can all 'generally' agree that Banks are fair weather friends, BUT we have to take responsibility for managing our own business affairs and performance professionally. Also, I work with enough banks to know that they will still support a good business case with well structured operations running efficiently, strategic plans managed effectively and financial focus on value management; even under the current economic climate.

They like to understand the business case which gives them confidence that you know where you are, where you are going, how you are going to get there and what assumptions and plans you have for what it is going to take to get you there ....... all reasonable requests I believe and factors which every business leader should have at his finger tips.

When you think about it in simplistic terms; even a gambler at a casino ultilises and manages his experience, knowledge and skills to try to maximise his return on the money he invests in his gambling. These are his non-financial assets. He also will never bet on black/red as the odds are not good enough ..... this is akin to sitting on the fence in business terms!

I realise that this is a very simplistic model, BUT how many businesses understand the strategic programme involved in the journey to achieving their vision; understand and

have defined the real value they deliver to their clients and the internal drivers of this delivery, have their business model and organisation aligned to managing the delivery of value to this objective;

have their market positioning identified and the initiatives aligned to achieving this objective;

have the balance of short and long term focus in place;

have the balance of financial and non-financial metrics to measure progress?

Or yet, even understand their appetite for risk in support of their entrepreneurial ambitions, etc., etc.,??

The moral is; if you don't understand, define and harness all of your resource for maximum effect on value management and creation; then you're wasting (at the very least some of ) your money! ....... and possibly other investors money .....

This is what real performance management, that will positively impact on your cashflow, is about!

Just a parting thought for you to consider ............. Do you KNOW; WHAT is the specific value you deliver to your customers and/or clients and HOW do you 'manage' the efficient and effective delivery of this value such that you maximise (financial) benefit for both them and you?? This is what sustainability is founded upon, helps you make the correct timely decisions and focus your resources for maximum success. So if you don't know ........ 'give me a call'