• Posted on: October 30, 2013 by: mardle0312

    Three Core areas:

    1)      Improving the Client Experience(s)

    Step change via understanding and appreciating the businesses cash conversion cycle past, present and future.

    2)      Cultural Change

    Establish a risk and opportunities envisaged cash profile with the customer via published, management and future state (Strategy/Forecast) cash streams via receivables (demand chain), payables (supply chain), inventory (stock, work in progress, reverse supply chains), CAPEX and investment chains.

    This will identify customer’s cash culture so the profile regarding ‘return OF your money rather than the ‘return ON your money’ is understood.

    3)      Technical Skill / Product Knowledge Development

    Review process via the cash profile to identify short term liquidity gaps and any potential long term funding chasms.

    Measure, Monitor, Manage, Mentor the business cash profile via the 18 month forecast and the strategy being deployed in the business to sustain, grow or otherwise to become cash centric. This will identify capacity, capability and maturity (of mind-set)


    Posted on: by: mardle0312

    The Strategy required in the Financial Supply Chain

    Areas of Learning and Development associated with cash will include:

    1)      Alignment of demand and supply chains

    Demand Chain – all aspects from determining the market to penetrate, and why, including:

    Project, product, service cash profile(s)

    Sector cash trends (Boston Consulting Group Matrix  analysed)

    Competitor and future trends

    Through types of contract re milestone payments, monthly payments to one off charges

    And then appreciating how this Demand profile aligns with the Supply Chain via:

    Suppliers: current, new entrants, funding support needed, merger/acquisition.

    2) The Financial Supply Chain strategy regarding current state will be reviewed via:

    Availability of types of funding, liquidity challenges, funding chasms.

    3)      The above two objectives will then identify  a SWOT approach whereby:

    a) Strengths, Weaknesses identified on the internal operational efficiency of the Cash Conversion Cycle (CCC) will determine the capacity, capability, maturity (of mind-set) of the organisation to cope with future developments.

    b) Opportunities and Threats identified from the above analysis will determine external funding requirements.

    Greiner Growth Curve explored.

    Narrative, not numbers, counts:

    The final piece of the strategy is the communication and future reporting via measuring, monitoring and managing KPI/KRI associated with each aspect of the cash value chain within the financial supply chain.

    One should note the Learning and Development of the above Demand and Supply chains includes the stock, work in progress and CAPEX requirements  as part of the overall strategy.


    Course Content for  Financial and Non- Financial Managers where interface between functions is critical to explaining cash efficiency.

    Who would benefit:

    Operations, manufacturing, Q & A, Sales, Marketing, Purchasing Managers  to name but a few

    Cash Conversion Cycle- 2 Hours include 2No. 15 minute workshops or 1 Hour Lunch and Learn

    What is it?

    A) Customers and Terms and Conditions of Sale

    i)                    Payment Terms- What, When, Why

    ii)                   Conditions that impact cash including returns, credit notes- analysis

    iii)                 Invoice Raising –timeliness, accuracy, dating, format, layout

    B) Suppliers and Terms and conditions of Supply

    i) Invoices in prescribed format, legally compliant

    ii) Conditions of payment agreed with latest purchase orders/ contracts

    iii) Payment by certain methods

    iv) Reverse supply chain costs/revenue and cash streams

    c) Inventories

    i) Stock – valuations, reserves, disposal costs, legal ownership, risk profiling

    ii) JIT/Kanban  other methods to reduce inventory and improve cash

    iii) Work in Progress- valuation, systems billing- write off, accuracy of costs

    Overall Food for Thought:

    re debtors/creditors are we compliant with Single European Payments Area (SEPA) ?

    re inventory- why have any stock at all? Work in Progress how managed?

    Cash Conversion Cycle Graphic (Copyright CapCut™) will be used throughout the Course.

    Course Content for Financial Managers.

    Who would benefit:

    Business Controllers, Financial controllers, accountants, credit control, creditors payments section, internal auditors, business process owners- accounting/IT systems, systems accountants, bank commercial managers  to name but a few.

    Working Capital Optimisation- 4 Hours to include 3No. 20 minute workshops addressing:

    What is working capital and why is it important to control?

    Is Cash efficiency and effectiveness an issue and how can it be identified and reacted to in a positive and constructive manner?

    What are your peers doing and how can Nestlé make a step change?

    A) Debtors- DSO (Days Sales Outstanding) – are your KPI’s measuring the right metrics at the right time? Demand Chain visibility and transparency

    i)                    Debtor Differentiation- What is it,  Why apply it re granularity

    ii)                   Debtor Development –proactive credit control and credit note analysis

    iii)                 Debtor Default – strategies to identify and reduce, remove from portfolio

    B) Suppliers –DPO (Days Purchases Outstanding)- Alternative metrics including Key Risk Indicators (KRI) . Supply Chain governance and sustainability.

    i) Certification of suppliers through portal

    ii) Categorisation of creditors re sole, dual, multi sourcing and payment scenarios

    iii)Classification of creditors – criticality to the business

    iv)                  Creation of a Reverse supply chain to identify refurbishment, re-engineering opportunities

    c) Inventories

    i) Purpose of holding Stock –  customer and supplier risk profiling from A) and B) above.

    ii) Customer demand chain and linkages to JIT/Kanban  other methods to reduce inventory and improve cash

    iii) Work in Progress- audit and valuation, systems billing- write off, accuracy of costs

    Overall Food for Thought: Monthly Management Reporting of working capital with action plans and timescales, by whom and how?

    Quarterly strategy review with mapping of progress, future actions to meet cash objectives.

    Cash Flow graphic with introduction of full cost model and risk review report (Copyright CapCut™)

    Posted on: October 23, 2013 by: mardle0312

    With the skill set of a credit manager I have often implemented a cross functional approach whereby credit management is applied to both an organisations customers and suppliers.


    Well a supplier who invests time, resource and therefore cash in supporting you may in fact be critical to your very existence. However if you do not appreciate that particular suppliers financial situation at any given point in time, one might make decisions about payment or procurement matters that actually causes the financial collapse of that supplier with obvious repercussions for the business, yourself and your/ its customers.

    Working capital embraces the usual supply, demand, stock,  work in progress and reverse chains but now, to meet the latest regulations and technological developments working capital now requires the CAPEX chain to be added.

    Furthermore the granularity now required to understand the flow of cash/funding within a business is critical to appreciating future cash flows and any liquidity and/or funding gaps. Metrics like ROCE and Free Cash Flow need to be considered too.

    Therefore a strategy is required concerning your investment chain, how cash/funding will be deployed i.e. where, when and how re up-stream or down-stream and /or marketing re operational short term funding and/or CAPEX re longer term funding.

    Following this analysis one can appreciate the ‘As Is’ current state of the organisations financial supply process chain and the steps needed to achieve the ‘To Be’ state. This will require due diligence and risk mitigation as any part of the process could identify ‘flaws’ that need immediate or longer term review.

    As there is interdependence between all the aforementioned ‘chains’ one will require further strategic management of the credit rating scenarios for both the organisation, its customers and its suppliers particularly as the likes of S & P are applying new rules to their working capital metrics.


    Posted on: October 4, 2013 by: mardle0312

    Financial versus physical supply chain a new accounting process

    The financial supply chain is often referred to as being the process of managing the efficiency and effectiveness of the whole working capital ecosystem.

    However the introduction of CAPEX into the working capital equation namely DSO+DIO-DPO as well as the terminology being applied by the newly published FRS102 re debtors are classified as receivables and creditors as payables now requires a new accounting process to be established as more working capital funding aspects are involved.

    There is also a whole new investment strategy being played out by corporates that impact SME’s namely supply chain finance programs like dynamic discounting and furthermore there is the intervention strategies being developed by major players like Sovereign Wealth, Pension Funds as well as the likes of MasterCard and PayPal that can leverage payment platforms to supply working capital funding.

    Add to this the threat to the main banks from the likes of Basel III re capital adequacy tests and the banks lack of focus as to whether to deliver commercial/mortgage type funds to you rather than to support riskier business ventures with their greatly reduced capital funds.

    I therefore propose that the new financial supply chain is renamed as the financial supply process which links the whole working capital and capex chain to the funding requirements of the business.


    If we take receivables the process is from the point of identifying a market, thru sales, thru delivery, customer satisfaction to invoice processing, receipt of cash, posting and reconciliation to all accounts.

    The physical supply chain for receivables is the usual Order to Cash process that sits within the credit control and accounting function in most businesses and is where debtors are part of the physical collection system

    If we take payables the financial supply process would embrace the approval of suppliers via procurement following a strategy that reflected and followed the strategy accomplished by marketing and sales in the pursuit of their targets (including stock and work in progress) plus the businesses capex strategy. These suppliers would eventually become creditors and would be subject to payment in accordance with their individual terms and conditions which themselves would be aligned to funding streams namely operational cash plus short/long term working capital funding streams.

    The business itself would be driven by working capital/capex models that reflect the mix of products, projects and service areas within the business. The strategy being the development of the cash rich areas (current as well as envisaged ) to satisfy stakeholders interests namely creditors, employees, investors, and including future options regarding growth like merger and/or acquisition or disposal.

    Cash conversion cycles are critical as they provide views on liquidity as well as optionality with regard to strategy. The Boston Consulting Group Matrix re Cash reflected such matters in the 1970’s


    A top level example of cash flows and working capital cycles are on a  separate power-point presentation that can be provided upon request.

    Please note the project cycle applies to contract projects in sectors like construction as well as for internal Capex projects and can be applied to marketing, research and development expenditures as they could have projects as defined strands to meet certain strategic goals. For instance market penetration into a new geographical area like Europe could have specified cost, sales and capex criteria within a milestone driven project.

    Finally we need to address the reporting of the new financial supply process. With integrated reporting, future statutory requirements and the need for transparency and good governance around cash re going concern concept the new process identifies the whole cash chain ‘cradle (cash inception) through to grave (cash collection and reconciliation).

    The new financial supply process will map the processes and within its structure highlight the ‘physical touch points’ like invoice raising and invoice receipt as well as map it through to the funding requirements of the business.

    The business can then establish whether it will require short term or longer term funding, or whether it can pay dividends, afford share buy backs, afford M & A, afford pension fund contributions etc.  or a mixture of all these to achieve the strategy.

    ©Copyright John Mardle CashPerform Ltd October 2013