The current crisis, both health and economic, which is affecting all our companies in a way that is as violent as it is unprecedented, reminds us of the crucial importance of Cash (“Cash is King”), and therefore the urgent need to manage it at the highest level of the company.

Cash flow must be a key element in a manager's dashboard; just like the level of the order book, stocks, profitability ratios or human resources data.

Concretely, the Treasury must be managed accurately, regularly and proactively.

Depending on the size of the company, this management may be devolved to a specific team (CFO, accounting) but the result of which is: the company's cash position (positive or negative) must be known to the manager at all times and in advance.

In full knowledge of the situation, he is then in a position to take the resulting management decisions.

An imperative tool: cash flow forecasting

To have this vision, the manager must rely on a synthetic tool: the cash flow forecast statement.

To be relevant, this cash flow forecast must:

• be made on a fairly long period taking into account the complete cycle (s) of activities of the company, i.e. 12 or even 18 months
• being updated regularly, with a minimum monthly or even weekly frequency depending on the size, maturity and positioning of the company
• take into account All of the company's flows (receipts and disbursements) whether certain or random (e.g. turnover), fixed or variable (e.g. commercial remuneration)

A real decision-making tool for managers, this forecasting table must also, and above all, be simple, understandable and clear.

In particular, it highlights the key indicators (in particular the working capital and its components) that allow the manager to activate the relevant leverage effects.

(NB: many software programs exist on the market — for example Agicap, Spendesk, Cash Force, etc... —, accessible for all sizes of companies; otherwise the use of an Excel-type spreadsheet may be sufficient).

A major indicator: the need for working capital (BFR)

A company's cash position (positive or negative) is a direct result of the difference between its working capital (FR = difference between stable resources and fixed assets) and its working capital requirement (WFR = needs for daily operations).

The Working Capital Requirement is a leading indicator of the health of the company; more than its intrinsic level, it is more its evolution that should concern the manager.

Indeed, depending on the level and the anticipated evolution of the Working Capital Requirement, the manager has management decisions to make (examples):

• anticipate the use of bank overdrafts/financing (in the event that the working capital increases leading to a negative cash position)
• optimize financial gains (in the event that the working capital is experiencing a decreasing trend leading to an excess cash position)
• implement actions to reduce working capital (in the event that the evolution becomes too marked, risking to stop the good development of the company)

Three key components: customer position, payroll, supplier position

In the context of monitoring this major indicator (BFR), it seems important to us to emphasize three key components, which must be managed precisely, regularly and proactively:

1- Customer station

The manager must ensure the rigorous monitoring of customer receivables, in particular on 2 essential aspects affecting the cash flow and even the financial balances of the company:

• strict compliance by customers with contractual payment deadlines
• the solvency of customers (this point is all too often the cause of serious difficulties for the company)

2- Payroll

The payroll (salaries + social security contributions) is often the company's first expense item; the challenge of managing it is therefore crucial in terms of cash flow:

• monthly review of the overall workforce, including planned, completed and incoming recruitments and
• Temporary workers (even if in accounting treatment they do not enter into the payroll)
• taking into account the inertia between the moment of decision and the impact observed (cf. labour code)

3- Supplier station

The schedule of payments to be made by the company to the various suppliers must be precisely monitored, allowing the manager to make proactive decisions:

• advance payment from certain suppliers at a discount/discount (if there is excess cash)
• negotiation of additional payment terms (if cash flow is tight)
• placing (or not) new orders versus stock levels

Of course, other factors influence cash management, which in some settings becomes a much more complex exercise.

This is the case in particular in the context of companies of significant size (coverage of interest rate risks), operating in several countries (multi-currency management and currency risk) or groups (consolidation of cash flow between parent companies and subsidiaries).

Cash flow: a strategic component, the permanent responsibility of the manager

Whatever the company, its size, strategy and financial structure, the expression “Cash is King” is fully relevant in the context of the crisis that we have been experiencing for several weeks.

It is this “Cash” that makes it possible to get through the current situation and that will allow the rebound from the crisis.

Moreover, managers are currently fully mobilized on the subject (implementation of continuity plans, negotiations and extensions of deadlines, partial activation of all or part of the teams, requests for cash loans, etc.) with the help of political and financial institutions that are setting up massive liquidity injection systems at an unprecedented level.

However, treasury should not be a one-off, short-term concern, or the preserve of a team of specialists in an accounting and financial department.

It is well, at the center of the functioning of the company, permanently and over the long term.

As such, treasury should be considered as one of the strategic components of the company, and therefore at the heart of the responsibilities and concerns of the manager.