Basis Points

Karen Kroll TREASURY & CASH MANAGEMENT: Blogger Karen Kroll supplies the Business Finance community with...more

Putting the Focus on Cash

So cash is king, once again. Not that it ever was dethroned; it’s just that, for a while, it shared its perch with other corporate goals, like growth. Not anymore. Credit is tight and sales are down, so companies have to wring all they can from the funds they have on hand. This prompts the question, Just how do you do that? more

Global Finance: Time to Make a Move

If your firm has been waiting to launch an initiative to globalize its finance department, management probably won’t want to hold off much longer. At least that’s the conclusion of several surveys taken over the past year or so.


According to a 2009 survey by the Hackett Group, 22 percent of companies will move to globally based transactional finance positions this year, up from 11 percent in 2008. It doesn’t stop there, however. Leading organizations are moving beyond simply shifting transactions-based positions to lower-cost areas of the world, and also are shifting more sophisticated functions, such as planning and forecasting, to lower-cost areas, says Steven Ehrenhalt, principal with Deloitte Consulting LLP. “We’re seeing the sophisticated end of the market really accelerating.” more

IPOs Appear Poised for a Comeback

But companies going public will be solid performers, survey indicates.


In 2009, only 41 companies went public in the U.S., according to information from Jay Ritter, a professor of finance at the University of Florida. To be sure, that’s nearly double the 21 IPOs in 2008. However, it’s well off the pace hit earlier in this decade; between 2000 and 2007, an average of 155 companies entered the public markets each year.


This coming year, however, the IPO markets will be busier. That’s the conclusion of a recent survey of capital markets executives at leading investment banks, conducted by the Chicago-based accounting firm BDO. Just over two-thirds of the executives polled predict an increase in activity when compared to 2009; one-fourth say it will be substantial. On average, the bankers are forecasting a jump in the number of IPOs of 25 percent. That would mean about 51 companies coming public in the U.S. this year. more

New Thinking on Cash Management

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.


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), which is one measure of receivables management, 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.


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. more

Cash Still Top-of-Mind

We may be starting a new decade, but a few things remain the same. In particular, cash remains king as we head into 2010. Large companies have stockpiled record levels of the stuff, notes Standard & Poor’s senior index analyst, Howard Silverblatt, in this blog post from November 16, 2009. As of mid-November, cash levels at the companies in the S&P 500 were nearly 10 percent ahead of the record $773 billion they were holding at the end of the second quarter of 2009. “Companies now have more cash than they ever made in any one-year period,” Silverblatt writes. The record amounts of cash are a result of cost-cutting, along with slashed dividends and reductions in stock buybacks, Silverblatt notes.


The intensified focus on cash management at many companies likely played a role, as well. More than half – 53 percent – of the 350 respondents to KPMG’s 2009 cash survey had implemented a working capital improvement survey. That was a jump of 43 percent from a year earlier. more

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