Do you have a cash culture or an ebitda culture ?
Interview with Yves Peccaud, Cash Culture Specialist
Yves Peccaud specialises in cash culture and in creating value for companies. In his work, he draws on his many years of experience as a controller, then as a CFO for companies in a broad range of sectors: Bristol Meyer Squibb, Carnaud Metalbox, The Walt Disney Company France, Danka France, and the Imprimerie Nationale Group. He has also helped several struggling companies to recover. An HEC graduate, he teaches at the Ecole Centrale de Paris and is an advisor at Université Paris-Dauphine. He is also the director of CASH CULTURE, and offers training courses with an original and practically-oriented approach to helping companies establish a sustainable cash culture.
We sat down to talk with him.
“Businesses need to switch from an EBITDA culture to a cash culture.” – Yves Peccaud, cash culture evangelist.
Your motto is clear: “Cash culture today, cash-rich tomorrow.” How did you develop such a passion for this subject?
I’ve had many years of experience in finance and business recovery. My own analyses of the realities of today’s markets have led me to the conclusion that it’s now more imperative than ever to anticipate economic and financial changes within corporations themselves.
Classic business models were weakened by the crisis and became obsolete. Today, a company’s financial management team has a new set of missions: to refine the ways in which the business is managed, and put new indicators in place. It also needs to become a genuine business partner to the Executive Committee and operational managers by proposing new ways of thinking and acting to ensure the company’s sustainability and ongoing development.
If the financial management team guides this transition correctly, and helps operational managers to achieve their objectives, then the whole group can start getting involved to generate cash and profitability. That’s why cash culture has become my “mission” in life. And it’s been very successful!
Everyone’s talking about cash culture these days…
It’s a real cultural shift. As everyone knows, and it’s almost a cliché to say it, companies don’t die from a lack of profitability, but from a lack of liquidity. As long as a company has liquid assets, it can cover its obligations and take the actions that are necessary to its development.
But when cash runs short, access to external financing can dry up, and then the company is at risk. Anyone who’s worked at a struggling company knows all about that. The cash culture needs to be extended to every company because, sooner or later, every company is going to face cash flow problems, whether they’re a blue-chip stock or just a small-to-medium family business.
To be able to maintain good levels of profitability and cash for the long term, we need to make changes to how we do things internally at every level.
That means switching from an EBITDA culture to a cash culture.
Who should be interested in the switch to cash culture?
Cash culture is for all companies, whether they’re industrial, in the service sector, or in the world of non-profit organisations. Often it’s the companies that are in the best financial health that take the fewest preventative measures for their cash health. They don’t have an urgent need for more cash flow: an excess of cash is a powerful anaesthetic. So what’s the antidote? Establishing a cash culture.
“Cash-rich” companies tend to be focused on compensating their shareholders, who often have high expectations, and on conquering new markets, which requires investments. But these objectives shouldn’t cause us to forget what’s really essential for the business over time. It’s essential for businesses to establish a rigorous approach to managing their cash, even if they have no immediate need for it.
Any final thoughts?
I’ll say it again: Companies die from an absence of cash, not an absence of profits. The right indicator to look at isn’t EBITDA alone, which is just one part of economic profitability; we also have to improve asset turnover.
That’s why, for two companies with equal profitability, the one which generates more cash will have more resources to beat the competition at a given cost of capital.
Yves Peccaud has developed a series of “offbeat” and highly educational training courses based on serious games: an innovative method that gives participants concrete ideas for establishing cash culture that are immediately applicable to their companies.
Do you want to learn more, and perhaps sign up for Cash Culture training courses? Contact us!
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