A Lodestar is a “guiding light” that serves as an inspiration, model or guide.
The management of cash is probably one of the most important aspects of running a business and, unfortunately, our experience over the years indicate this management discipline is often woefully inadequate.
When cash is plentiful this task is regarded as unnecessary and when cash is short it becomes a chore and takes up an inordinate amount of management time. So it is no wonder that so many organisations struggle with this basic discipline.
A soundly financed organisation is vital, if the management is to maintain the right conditions for the business to operate effectively and prosper, with cash being allocated to the areas of the business with the best opportunities for success.
Cash management becomes crucial during economic downturns as sources of finance from institutions is limited and in short supply and becomes increasingly expensive to finance. Trading conditions become tighter as inflation begins to manifest itself, debtors take longer to settle whilst creditors increase the pressure for payment on time.
As a result the organisation and its management begin to concentrate on survival by micro managing cashflow that distracts senior management from the task of managing the business.
A review of the way that cash is generated within the organisation gives us an excellent view of what action is needed to revitalise the fortunes of the business. Equally an analysis of cash outflows helps us gain a valuable insight into the costs of the organisation and, coupled with the profit statement, how costs behave.
Management often play down the seriousness of cashflow crises It is absolutely vital that all parties are aware of the situation, particularly lenders, in order to demonstrate management are taking action to address the situation. This will encourage all parties to participate and give any action a much greater chance of success.
Consequently, LODESTAR Special Projects can advise and implement a strategy to address the situation.
LODESTAR Special Projects work with senior management to actively manage cashflow within the organisation giving management more time to focus on the core disciplines that generate cash and profits within the business.
When profits and cashflow are healthy and organisations are investing in the future costs start to escalate. However, when the fortunes of organisations start to falter and the economy is in a downturn management find it difficult to contain and cut costs.
Cost saving are synonymous with value for money and should already be enshrined in the culture of the organisation. Waste must be eliminated and unnecessary expenditure outlawed.
Care must be taken to ensure expenditure and investment levels are sufficient to sustain the current level of business and allow for future requirements as the organisation continues to develop its business growth for the future.
Help is as hand as LODESTAR Special Projects can conduct an independent review of the situation and manage a cost saving exercise as part of an overall integrated strategic review.
In debating cash management and and cost savings we make no apologies for the simplistic approach we adopt.
Our experience has taught us these disciplines are not given the right level of attention across the whole organisation.
A state of hubris and complacency act as barriers to management facing up to the situation, let alone taking responsibility for managing the business through a crisis.
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