• So why are corporates/SME’s hoarding billions in cash accounts across the globe?

    Recent evidence suggests that ‘lessons have been learnt’ from the 2008 and the on-going financial crisis re Libor,  FX, PPI miss-selling and in Europe the failure to agree on the way forward re SEPA, EMIR and even bank funding (Germany announcing that the proposals are not ‘legal’

    Cash hoarding continues to occur as trust in banks, the uncertainty of world politics, social unrest in the EMEA area, China’s credit crunch and the US Fiscal Cliff being ‘delayed’ is making businesses prefer this option.

    Furthermore it provides them with the strategic agility to cover shortfalls in operational cash flow that may occur say due to suppliers being affected by natural disaster or where CAPEX may be needed to secure say new premises as the old ones have been affected by say flooding.

    Businesses with cash can also satisfy shareholders demands for dividends, undertake buybacks (Think Apple in the past 6 months) and develop internal growth programmes re R & D or even develop an M & A target without tapping into the banking/financial system (think Facebook’s acquisition of WhatsApp this week)

    Credit Management and the DSO lagging indicator

    Recently, several credit agencies have elected to reflect their own and quite subjective view on whether a company has a good credit history and by taking other factors into account like suppliers scores they have generated ratings that portray, for example, good or very good credit worthiness.

    The DSO metric assists in an understanding of the tracking of debtors but does it really help to understand the organisations ability to pay its bills or support its customers on a sustainable basis?

    I suggest that one requires a narrative that explains how sales are generated, why cash may fluctuate and a fuller appreciation of the commercial terms of the business.

    Posted on: February 1, 2014 by: CashPerform

    Cash is King ….but well before it is in the bank!

    Too many organisations, companies and even financial institutions are focused on the ‘end result’ of cash balances on the balance sheet. Maybe they should be addressing the financial supply chain in its entirety? In many situations cash is not received or paid on time because of ‘breaks in the links.’

    These ‘breaks’ are numerous in type and in frequency. They can range from timing, contractual through to system and even cultural issues.

    Our research has identified simple steps in all three disciplines of the cash conversion cycle, working capital optimisation and the financial supply chain that can enhance the collection and payment of cash.

    Strategy is critical in selecting the right steps at the right time, as to not ‘mend’ the broken links in the right sequence at the right time could lead to major business challenges that could take years to correct.