Top 5 Character Traits of Expert Cash Managers

Expert - Concept with Magnifying Glass.Do you consider yourself a good manager of cash in your business?

For the last several weeks, I have been discussing Cash Flow Forecasting.  As small business owners we all know that cash is our businesses lifeblood.  Managed well, your company is healthy and strong.  Managed poorly, your company goes into cardiac arrest.  So, what character traits separate the strong from the weak?  Here are the top 5 that I believe make a difference.

Characteristic #1: Expert Cash Managers Are Realistic
Being a small business owner requires a lot of optimism to start and run a successful company.  However, when forecasting cash flow, being realistic is a requirement; especially, in sales forecasts.  In working with clients over the years, sales forecasts almost always need to be adjusted downward when preparing cash flow forecasts.  Similarly, realistic time frames need to be set as they relate to the speed of new programs which tie to revenue generation. Many companies over estimate how quickly they will be able to get a new program up and running . . . and selling.   This, of course, translates into longer time frames for expenses.

As a CFO, it’s my role to ensure that realism exists in a company’s planning activities.  Many a company has forecasted their revenues too optimistically, and then spends the budgeted expenses at a rate faster than the cash in-flow.  We all know what happens next…cash flow problems!

Characteristic #2: Expert Cash Managers Are Organized
Fundamentally, this means having a place for everything and everything in its place.  In business, this includes policies, systems, processes, job descriptions and using technology effectively.  As businesses grow, by their very nature, they become more complicated.  Being organized in how we accomplish work (e.g. selling, producing, billing, collecting) and managing people is critical.  The efficiencies created by being organized almost always have a positive impact on cash flow.  For most small businesses, embracing this simple yet profound characteristic of organization will have the most impact on cash flow.  With most clients, this is one of the first areas I address to improve their cash flow.

Characteristic #3: Expert Cash Managers Are Flexible
Preparing a forecasted cash flow doesn’t ensure you won’t  have cash problems; but it will give you the flexibility of making the changes needed to ensure cash flow is positive.  One of the great strengths of a small business is the ability to make changes quickly to adapt to their business environment.  Flexibility can mean:

  • offering discounts or different terms to customers;
  • delaying payments to vendors;
  • renegotiating loans, credit lines or contracts; and/or
  • eliminating expenses.

I have found by having a cash flow forecast, the chances of improving a negative forecast is very high.  Flexibility allows a business owner to make cash flow management an art not a science.

Characteristic #4: Expert Cash Managers Are Disciplined
Discipline can be defined as “to produce a specific character or pattern of behavior”.  In business this can mean staying committed to a course of action or plan.  Discipline requires that we develop a plan for our business, and make decisions that keep us on track.  It means we develop a cash flow forecast and manage against it.  Unfortunately, I see companies abandon their plan by spending money on items not included in the cash flow forecast.  Either they didn’t have the discipline to stick with the plan, or they didn’t have the discipline to take time to develop a good plan.  Discipline means we make the hard decisions early and often.  Without discipline cash management is nearly impossible.

Characteristic #5: Expert Cash Managers Foster A Cash-Conscious Culture
When a small business starts, the owner naturally maintains a keen focus on cash.  In addition, he/she is usually the only one authorizing money being spent.  As the company grows and hires new team members, management of cash quickly becomes more complex. The owner is now challenged to keep tighter controls on cash.  Creating a conscious culture of cash involves teaching all team members how their actions and decisions impact cash flow in the business.  As leaders, we must imbue our beliefs, attitudes and values concerning cash.  We must create a culture where everyone in their role takes ownership of cash related decisions.  I have worked with companies that have incentivized their sales people on collections not just sales.  Do you think their sales people may negotiate contracts differently than if they weren’t incentivized?  Implementing a cash conscious culture empowers your team members to focus on the cash flow of your business, which in the short and long term is good for everyone!

How many of these characteristics do you embody?  I challenge you to choose one of the areas that could use some improvement, and map out a plan to become an expert in that area. It takes time and discipline, but it can be done. And, I’m here to help. Even if you need help strategizing your plan to improve your company’s cash flow, I can help steer you in the right direction. Send me an email (rick@cforickarthur.com) and I’ll be happy to assist you on your way to becoming an expert cash manager.

Rick Arthur

Written by

Rick Arthur is a CFO whose expertise is built on Financial Intelligence and 35 years in senior financial roles. Coupled with a CEO’s perspective and the experience of building his own $20 million company, he brings a unique depth of insight into business from the top down. Wired to get to know people, Rick works hand-in-hand with business owners of intentional, growth-oriented companies, solidifying relationships as a trusted advisor and confidant to his clients. He leverages his experience to help business owners gain traction and stay laser-focused on the company’s vision, cash flow, and profitability – all while creating big picture solutions for strategic planning, growth and sustainable success.