So, what steps can CFOs and treasurers take to move their firms from the laggard or average categories? Based on the study results, one key to leading performance is taking a holistic view to cash management, and including all stakeholders, such as the business unit managers cheap oakleys sunglasses, in forecasting cash flow. While it may mean more work at the start, gaining input from a wider range of sources pays off in greater accuracy. This allows the companies to fine-tune their cash management strategies to minimize costs and more effectively use internally generated funds.
Equally significant were the steps that best-in-class companies either avoided or implemented to a lesser degree than other firms. Just over one-quarter of best-in-class companies had extended their payment cycles, versus 31 percent at other firms. Only 15 percent of best-in-class companies had reviewed and revised the credit terms they offered their customers – about half the percentage of other firms.
What is surprising is the mix of steps that best-in-class companies have taken to navigate the economic downturn and credit crunch. For this study, best-in-class firms were those with lower-than-average days-sales-outstanding (DSO) Cheap NFL jererseys, which is one measure of receivables management Cheap NFL jererseys, says Nasreen Quibria, senior analyst with Aberdeen and an author of the study. DSO was 21 days at the top firms, versus 72 days at the firms that made up the bottom 30 percent of companies, aka the laggards. The other measurement used to distinguish the high-flyers from the rest was the accuracy of their cash flow forecast. Best-in-class firms were able to nail their forecasts 84 percent of the time, versus 51 percent for the laggards.
Another key focus among the best-in-class centered on the touchy-feely stuff. Just under two-thirds of best-in-class firms had automated interdepartmental communication, compared with 38 percent at laggard firms. “A successful treasury function cannot work in a vacuum,” the survey report notes. Instead, treasury needs to work with other business units to help employees outside of finance understand and support the processes needed to manage cash flow.
As I noted last week, cash management remains front-and-center for many corporate treasurers and CFOs. So, it’s not surprising that more than four in five of the 130 finance executives who participated in a recent study from Aberdeen Group said that their firm’s focus on cash management had increased over the past 12 months. The study, “The 3-Part Balancing Act of Cash Management,” is available on Aberdeen’s Web site.
Instead cheap oakleys sunglasses, best-in-class companies appear to have concentrated their efforts on several other strategies to better manage cash. For starters, they focused more resources on demand planning cheap oakleys sunglasses, or forecasting the volatility in the demand for their products or services. One-third of best-in-class firms had dedicated resources to demand planning, compared with 23 percent of the other firms. In addition, nearly one-fourth had taken steps to enhance their relationships with their banking partners, compared with 17 percent at other companies.
Investing in technology also appears to pay off. Among the top companies, 52 percent had implemented cash reporting and forecasting systems, versus 29 percent at laggard firms. Similarly, 70 percent of the leading firms had commercial card programs in place, while only 43 percent of laggards did. Fewer manual processes has led to lower costs and streamlined processes at the top companies. ###
Managers at best-in-class firms have upended conventional cash management wisdom. “The traditional ethos has been to stretch payables and collect interest off the float,” Quibria notes. According to the study, however, the mean days-payable-outstanding (DPO) number at best-in-class companies was 34 days, versus 56 at laggard companies. As a result, the top firms were better able to capture discounts and avoid late fees.
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Cash management ensures that the firm has sufficient cash during peak times for purchase and for other purposes.
回复删除Cash management helps to meet obligatory cash out flows when they fall due.
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