Competent cash flow management, ability to view daily cash flow short- and medium-term projections linked to a detailed understanding and having full visibility of working capital drivers, are the key ingredients to measure the effectiveness of turn-around strategies.
In many instances, companies and businesses in financial distress resemble “chaotic” approaches akin to splash tuns of mud against a white wall in the hope that something will stick.
First order of business is to determine and define the challenges attached procure-to-pay, and order-to-cash. In many instances the drivers to each to these cycles are not fully being understood. Its like your Windows computer not working properly due to issues with drivers.
Once challenges are defined and gaps are identified, develop workable strategies that reflect on solid options. At that junction it is important to be able to describe to funders, stakeholders, investors, and bank funders what the Cash Conversion Cycle of your business looks like. Why is it the way it is, what is required to close gaps and how is management going to apply common sense to executing strategy and tracking it.
Few fully understand their Cash Conversion Cycles and the drivers of same. In many situations it is a scrambling of record-to-report. That is meaningless unless the Cash Conversion Cycle is fully understood. Funders normally hammer on a fulfilling record-to-report requirements, beating the drum without fully understanding how the reporting comes about. Such situations many times over lead to businesses failing when they otherwise could have been saved with a proper understanding of gaps negatively impacting the Cash Conversion Cycle.
