Six Steps to Avoid Your Next Dash4Cash | FTI Consulting

2020 Foresight: Six Steps to Avoid Your Next Dash4Cash

Corporate Finance & Restructuring

March 11, 2020

Hourglass

It doesn’t take a crystal ball to know what your company is going to be doing in the weeks running up to June: if your business is like a lot of others, the end of the fiscal year will be accompanied by a flurry of activity I call the Dash4Cash.

If you stop replenishing stocks for a week or two, delay payments to suppliers beyond terms, and chase your customers who are used to your otherwise lax collection activities, your cash flow statement will look a lot better – briefly. But a few weeks after all that effort, you are almost certain to be back where you were before the Dash, and maybe even a little worse off because your team wasted most of June trying to make your financials look better artificially.

I am not sure why so many businesses repeat this push year-on-year. Anything beyond a superficial look at a company’s financials will expose the annual cycle. It negatively impacts customer and supplier relationships and will eventually influence long-term profitability. So, it’s not fooling anybody outside the company and it’s likely not fooling anybody inside the company either.

Fortunately, there is a superior alternative to pretending to be in shape. It’s called being in shape. Not many companies do it, but if you do, your business is likely to enjoy a number of advantages, including increased free cash flow, lower balance sheet risk, and a lower cost of capital once lenders see your new and improved financials. Typically, this even comes with efficiency gains, particularly if you employ new technologies like Robotics Process Automation (‘Digital Workforce’) to drive down the cost of your back-office processes.


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