Optimising cash flows: much more than “getting on with the bank”
Theory and practice
Financial statements and performance indicators help us understand the health of the company, but there is another aspect that separates those who react from those who anticipate: the management of cash flows.
You often hear people say “we need to manage liquidity better” or “optimise relationships with the banks”. But what does that really mean in practice?
It means equipping yourself with practical tools to forecast liquidity, identify areas of strain in advance and build a strategic, ongoing relationship with the banks, not just a reactive one.
Day to day, a few clear actions make the difference:
- a reliable cash flow forecasting system (at least 3 months ahead);
- monitoring of financial KPIs linked to working capital;
- clear reporting to deal with banks professionally.
The most important indicators include:
- DSO → average collection time from customers;
- DPO → average payment time to suppliers;
- DIO → inventory turnover.
In a context where the cost of money is significant, financial management must be forward-looking. Having an up-to-date view of cash flows makes it possible to take decisions with greater clarity, avoiding sudden financial strain and improving the business’s ability to plan.
It all starts with practical tools and a structured working method.
Anyone who works in manufacturing knows it well: managing finance in a context of long cycles, high stock levels, customers who negotiate endless payment terms and suppliers who demand punctuality is a real feat.
The solution?
Implement a dashboard integrated with the company’s management software, able to cross-check orders, deliveries, and invoices issued and received.
This gives you a rolling cash flow, continuously updated and useful for operational decisions.
By adding recurring outgoings - loan repayments, salaries, taxes, social security contributions - the cash forecast can extend to 3 or even 6 months.
The relationship with the banks must also be built over time, methodically:
- talk openly about the numbers, even when they are not impressive;
- anticipate funding needs at seasonal peaks or during investment periods;
- keep all the terms under control, not just the interest rates.
A bank doesn’t trust perfect financial statements but consistent ones. And a credible business owner isn’t the one who asks for less but the one who plans better.
Companies that constantly monitor their cash flows are also able to negotiate better with customers, suppliers and banks, because they take decisions with greater clarity. Liquidity, in fact, is not just a consequence of management: it is one of the tools that determines the business’s capacity for growth.
Managing cash flows means steering liquidity before it starts steering you.