Sir Richard Branson once said, “Never take your eyes off the cash flow because it’s the lifeblood of business”. I hear a lot of entrepreneurs and business leaders talk about cash flow as the most important success factor in their business. But most times we dive deep and understand the inner workings of their business, their strategy, their processes, their risk management framework, and the key drivers of their business; we find that the way they manage their cash flow does not reflect its importance.
Why do we see this trend? Generally, we find it’s not because of a lack of understanding the importance of cash flow in their business, but mainly due to the following factors:
- The real cash flow cycle of the business (from strategy to money in the bank) differs significantly from what is on paper or understood by management.
- The information that is used to manage the business and make decisions is not accurate, complete, valid or obtained in a timeous fashion.
- Policies and procedures are created in isolation, thus not taking the holistic impact on the rest of the business from a cash flow perspective into consideration.
- Key drivers and KPI’s are skewed towards accounting performance instead of cash flow performance.
- Cash flow drivers are not properly identified, measured, evaluated and reported on.
- Businesses make use of complex structures and processes that do not support their vision or strategy.
- Businesses do not prepare cash flow budgets and forecasts that assist them to plan their future cash flows – the excuse generally being that it is impossible to determine cash flow dates so long ahead of time and even if you can predict the values, the actual timing will differ.
- Businesses do not have the ability to update and predict their cash flows and manage their liquidity in real-time.
We find that the above factors are prevalent in most businesses, regardless of its size and maturity. Small to medium size businesses are generally nimbler and can adapt quicker to the enhancements that proper cash flow management brings to their business. We find that larger organisations, although it may take longer to implement new cash flow management processes and protocols, tend to benefit even more – not only due to the economies of scale, but also because as the business grows, we tend to see a higher prevalence of the factors identified above.
When we founded wauko, we used the following as one of our reasons why we believed that the time was ripe for a business like wauko: “Cash flow is perfected when you identify, measure and react on the key drivers in your cash flow cycle”. Today, six and a half years later, we have built a business that empowers every person and organisation everywhere with the cash flow management tools to optimise their return on investment.
Every organisation needs the tools to optimise their cash flow – wauko engages with its clients to gain a full understanding of their business, their cash flow cycle, and their cash flow solutions. This approach allows us to shorten their cash flow cycle and make it more productive by implementing tailor-made policies and processes that align with the key business drivers.
By focusing on the full business, as well as its processes, we maximise efficiencies, while minimising the risk factors for the organisation as a whole.