In the business world, the cash management is the backbone of any business, regardless of size or sector of activity. More than just an accounting indicator, cash flow represents an organization's ability to meet its financial commitments and seize development opportunities as they arise. In France, the statistics speak for themselves: according to the Banque de France, more than 25% of business failures are directly attributable to problems of treasury, and not to a lack of profitability. This reality highlights the crucial importance of rigorous and proactive management of financial flows.
The recent health and economic crisis has further reinforced this evidence, highlighting the vulnerability of undertakings whose short-term financial resources were insufficient to cope with an abrupt interruption of their activities. For many managers, especially SMEs, this period was an opportunity to realize: cash flow is not only a technical accounting issue, but a strategic issue that deserves constant attention.
Based on this observation, in this article we will explore the multiple facets of cash management corporate. From the analysis of working capital needs to the optimization of payment terms, including modern predictive management solutions, we will address all the issues that managers and financial managers face on a daily basis. Our objective is to provide a complete vision of the issues, but also tools and methods to ensure the healthy and effective management of this nerve that is cash flow.
La treasury of a company represents all the liquidity it has at its disposal at a given time. It is the balance between the inflows and outflows of money over a specified period of time. More specifically, a distinction is made between:
- The treasury active: all cash on hand (cash on hand, bank account balances, short-term investments)
- Passive cash flow: short-term debts to financial institutions (overdrafts, cash facilities)
- Net cash flow: the difference between active cash flow and passive cash flow
The latter is particularly significant, as it reflects the real capacity of theventure to honor its immediate financial commitments. A positive balance indicates a favourable situation, while a negative balance may indicate liquidity pressures.
Beyond these accounting elements, cash flow also includes all transactions that affect cash flows: receipts related to sales, disbursements related to purchases, payments of social and fiscal contributions, loan repayments, etc. Controlling these flows is the essence of cash management.
Cash flow plays a fundamental role in the life of a company, well beyond its purely financial dimension:
1.Financial health indicator: A positive and stable cash flow generally reflects good financial health and controlled management. Conversely, recurring cash flow pressures can reveal structural imbalances, even in a venture apparently profitable.
2. Operational security: Having sufficient cash flow makes it possible to absorb hazards and unforeseen events (late customer payments, temporary drop in activity, breakdowns requiring urgent investments).
3. Negotiation leverage: A company with abundant liquidity can negotiate more favorable purchase conditions, obtain discounts for payout relying on its suppliers, or seizing investment opportunities.
4. Decision-making independence: A solid treasury limits dependence on financial partners and offers greater freedom in strategic choices.
As a famous business executive pointed out: “Profit is an opinion, cash is a fact.” This formula perfectly summarizes the reality that entrepreneurs experience: a business can theoretically be profitable according to its financial statements, but end up at a standstill. payout lack of cash available at the right time.
Working capital requirement (WCR) is a fundamental concept for understanding cash flow pressures. It represents the amount needed to finance the time lag between:
- Expenses incurred (purchases of raw materials, stocks, salary payments)
- Receipts collected (customer payments)
Ce need is generally calculated using the following formula:
BFR = (Stocks + Accounts Receivable) - Supplier debts
More simply, it is the amount that a company must finance to ensure its operating cycle. A high working capital exerts significant pressure on cash flow, as it immobilizes financial resources that are not available for other uses.
Several factors directly influence the BFR:
- The duration of the operating cycle (period between the purchase of raw materials and the receipt of sales)
- Inventory management policy (volume, turnover)
- The payment terms granted to customers and obtained from suppliers
- The seasonality of the activity
Optimal management of working capital is therefore a major lever for improving a company's cash flow situation.
In France, payment terms represent a particularly sensitive issue. According to the Observatory of payment terms, despite the regulations limiting the maximum period between the issuance of the invoice and its payment to 60 days, the reality is often different:
- The average payment period for customers is around 44 days
- Late payments concern more than 30% of invoices
- SMEs are particularly vulnerable to the late payment practices of large companies
These deadlines have a direct and significant impact on the cash flow of companies. An extension of customer settlement periods of only 10 days can increase working capital considerably and create significant tensions, especially for structures with limited margins.
In addition, non-compliance with timeframes legal regulations generate significant hidden costs:
- Time spent on reminders and collections
- Use of short-term financing solutions (often expensive)
- Tension in commercial relationships
- Risk of a domino effect on payouts to suppliers
Faced with these challenges, businesses need to put in place effective strategies for managing payment terms, both on the customer and supplier sides.
Beyond structural problems, companies face cyclical risks that can suddenly weaken their cash flow:
1. **Seasonal variations**: Some sectors experience significant fluctuations in activity during the year, generating needs temporary funding during off-peak periods.
2. **Customer failures**: Unpaid payments or significant delays in payments, especially from customers representing a significant portion of turnover, can quickly destabilize cash flow.
3. **Expenses exceptional**: Hardware failures, disputes, tax or social adjustments... These unexpected events generate unplanned cash outflows.
4. **Poorly controlled growth**: Paradoxically, a rapid increase inactivity can create significant cash flow pressures, with working capital increasing in proportion to the volumes processed.
5. **External shocks**: As the recent health crisis demonstrated, macroeconomic events can abruptly dry up cash inflows while maintaining certain incompressible expenses.
The ability to identify and prepare for these risks is an essential part of a managerial effective cash flow.
Setting up a cash flow forecast is the fundamental tool for anticipating tensions and optimizing liquidity management. Ce plan The forecast generally varies according to several complementary time horizons:
1. **Annual plan**: It offers a strategic vision of medium-term financing needs and makes it possible to identify critical periods.
2. **Quarterly or monthly plan**: More detailed, it integrates known elements of the order book and firm commitments.
3. **Weekly or daily plan**: A real operational tool, it guides daily cashing and disbursing decisions.
To be effective, this forecast must be based on reliable data and be regularly updated daytime. It should also clearly distinguish between:
- Certain flows (fixed deadlines such as rents, salaries, loan terms)
- Probable flows (customer and supplier invoices at an agreed due date)
- Random flows (expected but unconfirmed sales, potential expenses)
Thanks to this tool, the manager or financial manager can simulate different scenarios, measure the impact of strategic decisions on cash flow, and set up solutions adapted before the difficulties arose.
Beyond forecasting, several operational levers make it possible to concretely improve the cash flow situation:
1. **Accelerated cash-out**:
- Reduction of timeframes billing (ideally immediate after delivery or service)
- Incentive to pay quickly through discounts or discounts
- Diversification of accepted payment methods (bank card, direct debit, instant transfer)
- Implementation of systematic and graduated recovery procedures
- Securing payments by deposits or deposits for large orders
2. **Optimization of disburs**:
- Negotiation of extended payment terms with suppliers (in compliance with legal limits)
- Staging of major investments
- Careful procurement planning to avoid emergency supplies that are often more expensive
- Rationalization of inventories to limit financial assets
3. **Management optimal stock**:
- Regular analysis of stock turnover
- Implementation of just-in-time procurement methods when possible
- Identification and disposal of dormant or obsolete stocks
These various actions, although sometimes technical, can have a significant impact on available cash flow. Their coordinated implementation often requires awareness-raising among all company departments, as cash management is not only the responsibility of the accounting or financial department.
Despite effective preventive management, occasional cash flow needs may occur. Several solutions Appropriate financing exists:
1. **Factoring (or factoring) **: This solution allows you to transfer your trade receivables to a specialized institution (factor) which immediately pays an advance representing generally 80 to 90% of the amount of the invoices. The balance is paid upon actual payment by the customer, minus commissions. This mechanism has the advantage of immediately converting receivables into cash.
2. **The discount**: This is a banking transaction that allows you to obtain the advance payment of a bill of exchange (bill of exchange, promissory note) in exchange for financial expenses. This simple solution is still widely used by SMEs.
3. **Cash credit**: In the form of an authorized overdraft or cash facility, it makes it possible to deal with temporary differences between receipts and spending. Its cost is generally proportionate to its effective duration of use.
4. **The mobilization of professional claims (Dailly) **: This mechanism allows professional claims to be transferred to your bank as a guarantee of short-term credit. More flexible than factoring, it is particularly suited to specific needs.
5. **Emerging digital solutions**: New platforms offer advances on invoices, crowdfunding or inter-company loans, often with simplified and fast granting processes.
The choice between these different solutions depends on many factors: urgency of the need, amount concerned, foreseeable duration, relative cost, impact on relationships with customers and suppliers. An accurate comparison of conditions (overall effective rate, ancillary costs, operational constraints) is essential before any decision is made.
Digital transformation offers significant opportunities to improve cash management:
1. **Cash management software**: These solutions allow a vision in times real bank positions, automated forecasts based on current invoices, and personalized alerts in case of risk of tension.
2. **Open Banking and Banking API**: Thanks to these technologies, businesses can aggregate data from multiple accounts banking and automate certain transactions such as transfers or reconciliations.
3. **Artificial intelligence and predictive analysis**: Advanced algorithms now make it possible to anticipate customer payment behaviors, to optimize the dates of settling suppliers, and to refine cash flow forecasts.
4. **Complete dematerialization of the Purchase-to-Pay cycle**: Automating the chain from order to payment significantly reduces processing times and improves visibility on financial commitments.
These tools are not a substitute for human expertise, but they do release times for strategic analysis and decision making.
To effectively manage your cash flow, it is essential to monitor a few key indicators:
1. **Average time of settling customers (DSO - Days Sales Outstanding) **: This indicator measures the average time it takes to convert sales into cash.
2. **Average supplier payment period (DPO - Days Payables Outstanding) **: It reflects the average time between the purchase and the actual payment of suppliers.
3. **Immediate liquidity ratio**: It assesses the company's ability to meet its very short-term commitments with its available cash flow.
4. **Inventory rotation**: This indicator measures the effectiveness of inventory management and their impact on cash assets.
5. **Cash conversion cycle**: This cash conversion cycle measures the time it takes for one euro invested in the operating cycle to return in the form of cash.
A dashboard integrating these indicators, ideally set to daytime in real time, is a valuable management tool for the manager or financial director.
Cash management is a vital issue for any business. Between art and science, it requires both analytical rigor and strategic vision. Faced with the challenges of extended payment terms, seasonal variations in activity or economic hazards, managers now have an arsenal of solutions and tools to secure their situation financial.
The key to effective cash management is based on a few fundamental principles:
- Anticipation, thanks to forecasts that are regularly updated
- Daily vigilance on cash receipts and disbursements
- Systematic optimization of the operating cycle
- The judicious use of short-term financing solutions
- The adaptation of tools Technological to the specificities of the company
Beyond these technical aspects, let's not forget that cash flow reflects all of the company's activity. Its sustainable improvement often requires more global reflections on the economic model, commercial policy or cost structure. Cash management is not an isolated function, but a transversal dimension that irrigates thetogether of the organization.
In an uncertain economic environment, cash flow control is more than ever a decisive competitive advantage, making it possible to get through difficult periods but also to quickly seize development opportunities. As an adage well known to investors reminds us: “Profitability is necessary to ensure the future, but cash flow is what makes it possible to do so.”
