Cash on hand between 2007 and 2008 fell at least 10% in all but two sectors. Total cash on hand, including short-term borrowings, fell 16% to 14.7% for PCs and peripherals to 2.6% to 1.9% for multi-utilities, according to REL.

REL is a division of The Hackett Group, a global consultancy focused on sustainable cash flow improvement from working capital and across business operations.

In the first in a series of articles from REL looking at developing and maintaining a cash culture study, it says that no sector experienced gains or even stayed even. As the credit markets froze and sales plunged, cash, the lifeblood of every business, became a precious commodity.

“Not surprisingly, most CFOs emerged from the crisis with a renewed respect for the importance of good cash flow management [1]. Senior financial executives at the 2008 Hackett CFO summit suggested that CFOs have increased their focus on cash flow and launched a number of initiatives to preserve corporate cash through such measures as improving their management of accounts receivable, accounts payable, spend management or inventory management.”

REL says 59% attending the Summit rated better cash management as their top priority, more than any other cash saving move, including freezing discretionary spending, delaying or scaling back investment and capital, freezing hiring, or renegotiating supplier agreements.

“In April 2009, CFOs rated working capital management and balance-sheet weakness as two of their five top concerns. With memories of frozen credit markets still fresh, many CFOs are still working hard to tighten lax cash management habits to create what we like to call a cash culture – a set of ingrained practices of efficient and effective cash management that saves the company money during the good times but prepares it to survive the worst. “

But overcoming old cash management habits, some of which may be decades old, is not easy. Neither is seeking behavioural modification not just in finance but throughout the company, including sales and operations.

To help CFOs in their quest to build a cash culture, REL asked companies all over the world to share details of their cash management practices. In particular, the survey found that:

• Companies with cash-management steering committees tend to have better results in their cash flow improvement initiatives than companies that lack steering committees.
• Odds of success improve dramatically with executive sponsorship.
• Companies that apply a corporate cost of capital have lower ratios of working capital to sales.
• The more tools and methods companies use to keep their cash flow on target, the more successful they are.
• Companies that offer incentives to executives and employees to keep a tight rein on their working capital needs tend to have lower ratios of working capital to sales.

The big headlines may be gone, but most companies surveyed remain deeply concerned about their cash practices. The survey found that nearly all (94%) respondents consider cash flow optimisation to be important or very important. Nor are executives just paying lip service to the idea. Most respondents said they have multiple initiatives [2]underway to improve at least one of the four most important cash management areas:accounts receivable, accounts payable, spendmanagement and inventory optimisation.