What Is Cash Flow Benchmarking?
Managing cash flow is one thing and while it’s important, cash flow management benchmarking is only achieved through not just comparing your own history, but another company’s history and achievements or failures to gain insight and implement new plans. Often cash flow benchmarking uses a specific industry and compares success and achievements, and whether they harm or hurt the industry in order to make changes.
In my experience with cash flow management, at least in the auto dealership industry, we utilize what we call a Dealer 20 Group. Each month, dealerships that participate review each other’s financial statements, including cash flows and exchange ideas and offer suggestions. This falls more under the heading of “informal benchmarking."
According to QFinance, best practice cash flow management benchmarking offers the same comparison situation, however, “using performance data obtained by studying similar processes or activities and identifying, adapting, and implementing the practices that produced the best performance results."
With informal benchmarking, an analysis may be performed but no new processes or practices are implemented. Informal benchmarking is also done through networking, reviewing other company’s websites, and hiring experts that are familiar with your industry.
Actually implementing the results of benchmarking is the key here.