From Cash Management to Working Capital in 2009
The credit crisis has focused minds on cash and liquidity forecasting - and not just the minds of the cash manager and treasurer; but also those of the CFO and CEO, as I have previously mentioned.
You can see it clearly in the articles being posted on gtnews. (gtnews.com is an article library for corporate treasury professionals).
In 2007 SEPA and bank connectivity were the focus of several of the top 10 most read articles, these issues have completely disappeared from the top 10 list in 2008.
In 2008 the favourite articles were mostly about cash management and liquidity forecasting.
Surely the credit crisis is not going away any time soon.
Bank rescues and defaulting companies are daily news and the public is probably now tired of hearing about it.
But it doesn’t reduce the need for companies to be vigilant about their future cash flows.
Companies should also use 2009 to move on and find a solution for their funding requirements.
As external funding is hard to get, more companies will look internally to release cash from their working capital and manage it more efficiently.
I will therefore predict that in the top 10 list of the most read articles on gtnews in 2009, many will be about working capital, how to optimise it and free up cash.
I will just hope that the authors will come up with more innovative and creative ideas than the traditional ways of improving the working capital.
This is all too often done by paying your suppliers late and reducing your own customers’ payment terms.
Instead companies should concentrate on processes such as centralising cash on fewer accounts, improving liquidity forecasting to reduce cash reserves, and reducing float.
This will truly create new value without hurting the business of the vendors and customers on whom you depend.
