An information hand-off is any point that information passes from person to person or from department to department within an organisation. It can come in many forms, anything from e-mailing my budget as head of a department to our finance director, to someone in the purchasing team requesting approval for a hefty invoice.
From a study in 2020* analysing survey responses from 1600 finance professionals, around 50% of them suggested they struggled with information hand-offs to the point where they were causing bottlenecks in their organisation.
So how does this affect your cash flow?
We know that speed and accuracy of information are incredibly important within today's modern business, so any hand-off that is slow or relies on the response from someone else has the potential to slow down the speed of our operations and the time it takes to get cash in the bank.
Let's look at some examples...
This is one of the most obvious areas as it's easiest to see where a delay may affect the ability of a business to process things quickly. Some businesses have systems in place that automate approvals, but some still have a process that rely on someone sending an e-mail, someone else picking up the e-mail, asking questions, generating a thread of e-mails between multiple individuals and departments before something is finally approved.
This is bad, not only because it's an epic waste of productive time, but also because for every minute you're not placing an order, there's a potential delay in delivering goods and services to your customers. Any delay in providing goods and services to your customers will also lead to a delay in your ability to invoice, which will also delay when that cash ends up in your bank account.
I don't want to tell anyone how to suck eggs, but sometimes it's worth reviewing this sort of thing and asking questions like:
The previous example was specific to a simple order approval, but if we expand on this a little further, we can see some of the other delays that may affect our ability to get from quote to cash in the bank quickly.
Let's say your business revolves around a technical sales process and it's not merely a case of getting an order, purchasing goods in, and then selling them on for profit. Let's imagine we have a sales team, a design team, a production team, a warehouse team, we might even have a quality team. Every single one of these departments could be involved in processing a single order, and any delay in communication between departments, whether it be sign off on a final specification, purchase requisition for specialist parts, or a quality assessment before something goes out the door, has the potential to elongate the time it takes for us to get money in the bank.
It can be similar for businesses that operate on a project billing basis. For example, any delays in delivering consulting work to a customer is delaying our ability to bill and any steps that require customer sign-off on the quality of delivery will also cause delays.
In this scenario we might want to ask questions like:
Budgeting & Forecasting
It's not as immediately obvious how information-hand-offs will affect cash flow in the area of budgeting and forecasting, but any area of the business that is creating bottlenecks has the potential to affect cash flow.
Let's say that your business is made up of at least four departments, you may even operate a group structure on top of that, so every time it comes to building the budget and generating a forecast, you're waiting on information from multiple departments and entities, which again may involve lots of back and forth until you finally manage to compile it into one consolidated report.
Some businesses take weeks, maybe even months to build budgets. Some businesses are still building budgets after they've started the year that the budget relates to!
So let's take this a step further then and use the example of a marketing team. As Head of Marketing, I'm awaiting the final budget approval for the Google Adwords spend. My plan is to ramp up spending in the next month as we run a seasonal business and need to ride the wave if we're going to achieve the larger targets we have to generate online enquiries during this period. The issue we have, is that my budget hasn't been approved as the finance team are still awaiting information from three other departments. My inability to execute on time may cost me lost leads, lost leads will cost me sales, and lost sales will affect both my cashflow and my overall income.
The above list is by no means exhaustive, and we don't by any means have all of the answers, but hopefully, as a result of this article, the cogs are whirring and you can start thinking a bit more about how information hand-offs may be causing bottlenecks within your business.
I'd love to help you find ways to reduce the time it takes for your team to share information. So feel free to contact me and I'll help where I can.