What is cash culture?
Also known as “financial culture,” cash culture is a collective mentality that emphasizes the importance of cash management. This approach goes beyond simply considering profits. It positions cash flow as a key indicator of the company’s performance and financial health.
This culture involves the adoption of an organizational strategy where optimal cash flow management, credit control, efficient inventory management, and consequently, improved profitability, are central concerns. Charles Durand, Director of Projects at KPMG France, emphasizes the importance of “building and managing robust cash flow forecasts” collaboratively. This involves working with operational teams who have the most up-to-date information on the company’s activities, allowing for constant adjustments. The goal is to develop a culture where every employee plays an active role in improving the company’s cash flow.
In summary, developing a cash culture requires a complete overhaul of the company’s organization and structure. A cash culture engages all employees in financial management, thereby strengthening collective awareness of the importance of cash flow.
Cash Culture: addressing the 3 major challenges of finance departments
Founded in Anglo-Saxon management methods, a cash culture offers a new alternative to finance departments, both in their approach to financial results and in decision-making and action implementation.
Problem #1 – Optimizing All Cash Flows
By adopting a “cash mindset,” financial departments focus primarily on optimizing cash flow. With this performance indicator in mind, managers can develop more refined strategies for managing cash inflows and outflows, involving better payment planning, rigorous management of receivables and payables, and real-time monitoring of cash flow. This increased cash sensitivity allows the finance department not only to prevent liquidity problems but also to optimize the use of available financial resources, thus promoting more dynamic and proactive financial management.
But cash culture isn’t just for finance professionals. When it’s also adopted by sales teams, it generally leads to improved receivables management. Salespeople identify high-risk customers and can adjust credit terms or payment methods accordingly, for example, by offering installment payments.
Another example is the purchasing department. The transformation of corporate culture requires purchasing managers to
Problem #2: Establishing a realistic and reliable overall financial situation
A cash culture offers finance departments the opportunity to develop a more complete and accurate picture of the company’s situation by encouraging greater transparency and information sharing between departments. This communication leads to a better understanding of sales cycles, the assessment of operational costs and returns on investments, and increased monitoring of cash flow risks. Such a holistic perspective is essential for making informed financial decisions and assessing risks and opportunities.
Issue #3: Concretely engaging employees in virtuous approaches
One of the greatest strengths of cash culture lies in its power to actively involve all employees in cash management. For the CFO, this means successfully promoting an understanding of cash flow at all levels of the company. As a key player in the transformation, the CFO must encourage each employee to adopt practices that promote good financial health. This can involve training on the importance of cash flow, implementing reporting systems that allow employees to see the impact of their actions on the company’s finances, or creating incentives aligned with cash flow objectives.
By making each team member aware of and responsible for their contribution to the company’s financial health, cash culture fosters an environment where optimal cash management becomes a shared goal and a source of motivation.
How to instill a cash culture?
Instilling a cash culture within a company involves promoting a mindset focused on efficient cash management, through general awareness of the importance of cash in all areas of the company (sales, purchasing, logistics, communications, human resources, etc.), both individually and collectively, rewarding initiatives aimed at optimizing cash flow, or through financial transparency and the regular sharing of financial results.
