• Posted on: December 22, 2013 by: CashPerform

    Discover how your management accounts improves your credit rating

    1)        Reviewed regularly by lending institutions

    2)        Requested by customers and suppliers alike whether they be credit controllers, purchase/ sales managers or financial directors

    3)        Monthly or at least quarterly accounts are more current that interim management statements (IMS) and statutory accounts

    4)        IMS are normally supported by management account type information and can reflect changes in organisational structure re new appointments, new merger/acquisition activities.

    5)        A quality set of management accounts will identify trends in areas like cash management, market segmentation.

    6)        Management accounts can reflect the aspirations and targets of the organisation

    7)        Action plans are normally identified within the management accounts and how the organisation perceives them with regard to priority.

    Posted on: December 16, 2013 by: CashPerform

    How do you keep the cash flowing throughout the organisation?

    Investment, whether it is director’s cash, debt or equity in all their guises needs to be managed such that plenty of time is allowed to renew, curtail or extend the existing arrangements. If new funding avenues are being explored then even more due diligence and therefore more time is required.

    Looking at the Demand Chain (Customers- new, current and old/debtors/Potential markets) one needs to appreciate when cash will come to fruition from the existing backlog and how much is the pipeline for the next 3 months that can be classified as ‘low, medium, high risk.’ Asset backed lending via factoring or other avenues may need to be considered.

    Review of the Supply chain will reveal core suppliers and how to possibly take advantage of Supply Chain Finance, dynamic discounting and maybe even purchase of suppliers’ assets.

    The inventory (stock, work in process and reverse supply) chain is where cash can become a very subjective issue. How much is WIP really worth when it has not been invoiced for over 6 months or when stock has sat on shelves for over 12 months? In fact due to deterioration, stock holding and disposal costs it could be a cash outflow!

    Finally the Capex/R &D chain needs to be analysed to appreciate the tranches of cash required as these are normally driven by milestones.

    These 5 cash cycles form the cash conversion cycle and a full analysis will identify whether cash will be needed at any point in the cycle and at any particular point in time.

    How to attract investors, customers, suppliers and employees with sustainable cash flow:

    Investors are interested in the return on and return of their cash at specific points in time.

    Customers are reliant upon longevity, innovation and creation when it comes to projects, products or services provided so they want to see management accounts that reflect healthy cash flow cycles.

    Suppliers are utilising their own cash to support your business with projects, products and services and require visibility of consistent payments.

    Employees have invested their skills and time in delivering your business strategy and require timely and accurate payments of remuneration, bonuses, expenses and pensions.

    Posted on: December 11, 2013 by: CashPerform

    Four possible applications of Supply Chain Finance(SCF)

    First Application:

    If you are an SME working for a corporate you can get ‘straight through’ SCF. In other words the SME gets access to cash due on invoices early. However when you sign up to this sort of SCF the long term impact is that you as an SME are beholden to the corporate for future business as your margins are gradually eroded by the credit rating that is not your own as you are trading on the corporate credit rating. Banks apply themselves to this area as you can imagine.

    Recently Apple has been criticised for ‘locking down’ its supply chain which stifled innovation in the supply chain, allowed Samsung to take huge market share as their mantra was ‘let suppliers innovate at REDUCED cost’, therefore generating margin for both the SME and for Samsung!

    Second Application

    Dynamic discounting can be applied at any point to any invoice from an SME to any supplier or by customer to the SME. This is normally where the SME is the ‘middleman.’ Customers could be corporates/larger SME or peers but the ‘middleman’ is ‘caught’ by accepting discounts from such customers and then attempts to apply this discount structure to suppliers with varying degrees of success. This ‘middleman’ could ‘lose out’ totally in both margins and cash flow if the mix and TIMING is not right between suppliers and customers discounting structures. The technology providers like Taulia like this ‘complexity’ and make money by obviously sourcing funding streams at better rates than their customers. Banks are trying this area.

    Third Application

    The final area is the SME who only sells services, products, projects ‘upstream to customers’ and therefore has no major suppliers (probably just a few employees/freelancers and a small office/factory)

    SCF is applied at the behest of the SME by utilising such platforms as Crossflow/C2FO where invoices are ‘exchanged’  for cash with a fee being applied that is driven by criteria like volume, value, timing etc.

    Fourth Application.

    If exporting, and depending upon which country/ region that is the recipient, SCF could be applied via Letters of Credit  (LOC)or/and Bank Payment Obligations(BPO) whereby a margin is obtained by the ‘platform provider’ in organising the paperwork to ensure timing and insurance are appropriate.

     

     

    Posted on: December 3, 2013 by: CashPerform

    Yesterday’s crash of the credit card systems belonging to RBS and NatWest reveals a distinct lack of investment in IT systems since the crash in 2008.

    Your working capital could therefore be impacted.

    Lack of cash receipts and payments to suppliers could leave you with excess inventory and production line balancing issues. The redress could be through detailed analysis of your financial supply chain and notifying the relevant authorities whether it is banks, insurance companies and even your accounatnts.

    More importantly, maybe, is to communicate any issues to your own customers, suppliers and investors.

    Posted on: December 2, 2013 by: CashPerform

    Small and medium-sized businesses (SMEs), however, frequently lack access to the capital markets and are therefore more dependent on banks for their external finance. Indicative median interest rates on new credit facilities to SMEs overall have fallen modestly since mid-2012. These rates do not, however, capture the full cost of credit facing SMEs, as they do not include the impact of fees or cashback deals. Furthermore, as lenders become more willing to extend credit to a wider pool of borrowers, falls in interest rates for some SMEs may be offset by banks charging higher interest rates to riskier ones.[5] Surveys of small businesses show more of an improvement in the cost of credit to SMEs: for example, businesses responding to the Federation of Small Businesses (FSB) survey reported that, on average, their cost of credit fell between mid-2012 and 2013 Q2 and continued to edge lower in Q3.  Those surveys also suggest that the availability of credit has been improving over the past year or so, albeit from a low base. There has been increased SME lending activity consistent with this improvement in credit conditions and the economy overall. Gross lending in the three months to October was £1.5bn higher than the same period a year ago. But repayments have also risen, resulting in negative net lending.

    Source: FSB ‘Voice of Small Business’ Panel.

    (a) Interest rates that small businesses that successfully applied for bank credit reported that they had been offered. Results have been re-weighted to exclude ‘unsure’ responses.
    For further details on survey methodology, see:
    www.fsb.org.uk/frontpage/assets/q1%20vosb.pdf