The Five Pillars of Confident Cash Flow
I’m proud to introduce you to our framework, The Five Pillars of Confident Cash Flow.
I have to admit; it didn’t start as a framework.
Like many new business owners when I first started, I was excited to get going. I thought everyone would be able to see things the way I did. I believed I had a fantastic and essential service to offer, and it was easy to see the benefits.
Unsurprisingly, I was wrong.
What I had was a seemingly random collection of things I could do to help a business with preventing and managing late payment and cash flow. Nothing was pulling them together, nothing to show how they collectively contributed to the end goal of eliminating late payments.
I also realised that I needed to talk about what I do to create those lightbulb moments for non-credit management professionals.
Three Heads Are Better Than One!
I started to think about a structure that showed how credit management could be embedded in a business, based on my experiences in the corporate world and came up with an initial four categories that encompass the typical order to cash cycle. I then developed it further into five categories to include more comprehensive cash flow management tools.
One conversation with a coach and the name The Five Pillars of Confident Cash Flow was born.
It took a conversation with someone else to realise I’d created a framework on which to base all my services!
The Five Pillars Review
If you follow my social posts and blogs, you’ll know that I firmly believe that late payment is a symptom, not the problem. It’s what happens when there are gaps in how trade credit is granted, managed and controlled.
You need to identify the gaps, and a framework is a great way to review what you’re doing now. It reveals a baseline from which process improvements can be implemented. It can guide decision making, unlock innovation, and support achieving your goals.
What Are The Five Pillars of Confident Cash Flow?
Pillar 1 – Prevention
As the name suggests, these are the activities that happen when a new order is received before you’ve agreed to accept the order.
- Customer Account Application Process
- Creditworthiness Assessment
- Customer Segmentation
- Terms & Conditions
- Credit Policy
Pillar 2 – Operation
These are the activities you do in the day-to-day management of trade credit.
- Information Management
- Credit Control
- Bad Debt Management
Pillar 3 – Detection
With the best will in the world, you’ll never stop everything bad from happening. Circumstances can change overnight, therefore it’s important to identify these changes early so you can react quickly to protect your business.
- Credit Limits
- Ongoing Creditworthiness Assessment
- Target Setting & KPIs
Pillar 4 – Integration
Protecting the business’s cash flow and profit shouldn’t be the remit of just one person. Everyone in the business should be engaged and onboard.
- Roles & Responsibilities
- Dispute Management
- Sales & Credit
- Supplier Management
- System Support
Pillar 5 – Review
Process improvement is not a one-time deal. The business evolves, the market changes, laws change, customers come and go. Your processes need to evolve with you if you want to keep growing securely.
- Process Review
- Risk Management
- Gap Analysis – Targets & KPIs
- Future Risks
If you want to learn more about the Five Pillars framework and how a Review could add value to your business, you can book a call today.