• Posted on: May 31, 2013 by: CashPerform

    Whist reviewing your cash forecasts one could be forgiven for looking at why you are not meeting your targets and thinking through sales and cost issues. However if one looks at who is providing your cash by way of investments it might be them that are driving unreasonable targets. Your investment community may be looking at the ‘return OF their cash’ rather than the return ON their cash, so look at when debt/covenants are due for repayment and how much.

    Posted on: May 20, 2013 by: CashPerform

    May saw me delivering the usual working capital efficiency  courses to corporates and I was struck by how keen they all were to chase cash and also to pay cash to suppliers in a timely manner. The major reason for this was that the triple dip recession and on going credit/cash crunch had weeded out the poor quality, inefficient suppliers. The problem now was that these critical  suppliers needed cash for their capital equipment. Why? Their own capital equipment had been punished beyond repair by poor maintenance, lack of investment and the fact that the focus was to satisfy all orders which meant working the machines 24/7.

    What was needed was tranches of cash but not through sales invoicing. Cash injections to buy new machines was required however nobody had explored that cash route. Why not have a right of lien over a machine, over the output or even invest in the maintenance and/or in the employees managing that machine?

    If you punish your capital equipment you will punish yourself and your customers. Why not ask your customer for funding support?

    With dividends or otherwise announced, shareholders placated-  possibly by buybacks and capital expenditure now approved for the rest of the year the only area that could go wrong is working capital.

    But surely debtors are under control? Trade creditors are being paid according to contractual terms? Inventory, whether it be stock or work in progress, is within the organisations internal controls?

    If this is not the case now then, yes, your cash forecast is under threat. So how do you address it? In the short term maybe communicate to the work force that ‘cash is king’. However in the medium (6 months) or long term a strategy for each area is required. Why? The risk to suppliers and therefore customers is immense if cash is not approached through a proven strategy that enhances the cash position for ALL particpants.

    Posted on: May 1, 2013 by: CashPerform

    Deutsche Bank upgraded Tata Motors from Sell to Hold.

    Analyst Srinivas Rao said, “Our prior rating was underlined by an expectation of flat-to-falling margins from rising competition and lower ROCE due to higher capex. In our view, the stock performance (-7% YTD) reflects the negative margin surprise and higher capex guidance. JLR’s medium-term prospects are positive but the cost of emission compliance are likely to constrain EPS growth and ROCE.”

    From an investors standpoint the FTSE has increased in value by almost 15% from January 2013 to May 1st 2013  and yet most corporate ROCE are lower at nearer 10%. However is the risk factor  fairly reflected in these two percentages over time spans involved?

    From a company point of view ROCE should always be higher than the rate at which the company borrows otherwise any increase in borrowing will reduce shareholders’ earnings, and vice versa; a good ROCE is one that is greater than the rate at which the company borrows.