Background
A sudden shift in the business environment placed a manufacturing company in a situation where customers began delaying payments, and suppliers shortened payment terms. This resulted in a systematic cash shortage for paying invoices, with no effective solutions in place to manage cash flow more efficiently.
Our Solution
The first step in solving the cash flow problem is understanding the situation, identifying its causes, and forecasting the near future while considering critical components. We implemented a cash flow management solution that:
- Automatically consolidated data from sales and purchase ledgers, taxes, salaries, loans, lease payments, investments, and interest payments.
- Added essential components for business and cash flow management, such as customer payment behavior types, alternative supplier lists, and critical material indicators.
- Made critical data visible through management reports presented graphically, with metrics and tables.
- Enabled detailed exploration for in-depth analysis.
Results
- Management gained the ability to see and understand the causes of negative cash flow.
- A routine of crisis meetings for cash flow management was established.
- Decisions were made to positively influence cash flow.
- Cash flow monitoring became part of daily operational meetings.
- Capital-raising decisions were based on the implemented solution.
Why Is This Important?
Cash is the lifeblood of any business. To manage it effectively, it’s essential to understand the factors influencing cash flow to make accurate tactical and strategic management decisions. Persistent negative cash flow can accelerate a company’s path to bankruptcy. With robust cash flow reporting, management can prevent liquidity issues and take timely actions to maintain operational stability.