Make Every Employee a Guardian of the Company's Cash Flow
20 March 2013
Read by 2241 persons
Liquidity problems: all bosses know them, but few employees care. It's up to the manager to get their employees involved.
In life, we can suffer from various illnesses, but we always end up dying from cardiac arrest. In a business, the equivalent is a cash flow crisis,” says Remy Paliard, professor of corporate finance at EMLyon. This metaphor is likely to resonate with current managers. According to the latest Oséo survey, 37% of SME bosses say they experienced cash flow difficulties during the first half of 2012. As for large groups, a majority of them consider their cash flow situation to be “difficult” for sixteen months (AFTE COE-Rexecode barometer of October 2012).
Weakening demand, longer payment deadlines, difficulty obtaining financing, rising cost of raw materials… The causes of this deterioration are multiple. With concrete consequences on the life of the company: cost reduction policy, hiring freeze, falling salaries… In these conditions, it is not easy to maintain team motivation! One solution? Make them aware of the problem.
Adapt your language to your audience and be frank
“We made a positive result of 525 million euros. However, the free cash flow [available cash, editor's note] is negative 162 million.” This is typically the kind of phrase heard at the highest level in large groups. But it is impossible to convey these words as they are when you are trying to explain the financial stakes of the company to your teams. No one will understand anything and the effect will be anxiety-inducing. The first rule, therefore, is to adopt language that is understandable to everyone. “If you tell the warehouse workers, for example: “We need to improve the working capital requirement”, there is little chance that you will be understood,” summarizes Michel Sion, trainer at Cegos. On the other hand, if you explain to them that there is money sleeping on the shelves, you will be speaking their language. The same goes for salespeople: tell them that, compared to customers, there is too much money out there, and they will immediately understand.”
To be sure that you know what you are talking about, familiarize yourself with the basic vocabulary of corporate finance and learn to read the main accounting documents (balance sheet, income statement, cash flow statement, etc.). If necessary, enroll in corporate finance training as part of your DIF (right to training).
In general, your communication actions should reassure without hiding anything about the reality of the situation. Also be precise and factual about the health of your company and draw up an action plan to provide concrete solutions. A presentation with diagrams or PowerPoint slides can help you get the message across.
Read the rest of the article on Capital.fr
In life, we can suffer from various illnesses, but we always end up dying from cardiac arrest. In a business, the equivalent is a cash flow crisis,” says Remy Paliard, professor of corporate finance at EMLyon. This metaphor is likely to resonate with current managers. According to the latest Oséo survey, 37% of SME bosses say they experienced cash flow difficulties during the first half of 2012. As for large groups, a majority of them consider their cash flow situation to be “difficult” for sixteen months (AFTE COE-Rexecode barometer of October 2012).
Weakening demand, longer payment deadlines, difficulty obtaining financing, rising cost of raw materials… The causes of this deterioration are multiple. With concrete consequences on the life of the company: cost reduction policy, hiring freeze, falling salaries… In these conditions, it is not easy to maintain team motivation! One solution? Make them aware of the problem.
Adapt your language to your audience and be frank
“We made a positive result of 525 million euros. However, the free cash flow [available cash, editor's note] is negative 162 million.” This is typically the kind of phrase heard at the highest level in large groups. But it is impossible to convey these words as they are when you are trying to explain the financial stakes of the company to your teams. No one will understand anything and the effect will be anxiety-inducing. The first rule, therefore, is to adopt language that is understandable to everyone. “If you tell the warehouse workers, for example: “We need to improve the working capital requirement”, there is little chance that you will be understood,” summarizes Michel Sion, trainer at Cegos. On the other hand, if you explain to them that there is money sleeping on the shelves, you will be speaking their language. The same goes for salespeople: tell them that, compared to customers, there is too much money out there, and they will immediately understand.”
To be sure that you know what you are talking about, familiarize yourself with the basic vocabulary of corporate finance and learn to read the main accounting documents (balance sheet, income statement, cash flow statement, etc.). If necessary, enroll in corporate finance training as part of your DIF (right to training).
In general, your communication actions should reassure without hiding anything about the reality of the situation. Also be precise and factual about the health of your company and draw up an action plan to provide concrete solutions. A presentation with diagrams or PowerPoint slides can help you get the message across.
Read the rest of the article on Capital.fr
