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- PIMCO’s Bill Gross: On the "Course" to a New Normal, September 2009 Investment Outlook
- Session: Automating Payables to Optimize Working Capital
- Session: Re-inventing your AP process.
- Session: Kyriba demonstrates their ASP-based cash management operation.
- Session: Cash Flow Forecasting: Overcoming Challenges
The name of this blog is Practical Turnaround Thinking and it’s written for 21st century management teams who are looking for practical steps to improve their company’s performance.
The argument here is that all organizations are rising or falling at all times. Just as winter comes every year, underperformance is inevitable at some point. Certain clusters of indicators signal the onset of decline. In the field of turnaround management, these indicators are known as Early Warning Signs (EWS) and these are the first things a turnaround manager checks when starting an engagement.
The first step for managers who want to use Practical Turnaround Thinking is to know and monitor the EWS, some of which are shown in the tables below. By using the tools of turnaround management, management can head off trouble and stay ahead of the curve.
Most of the quantitative information that managers need can be found in the current financial statements generated from the accounting system. Other indicators, such as market share and financial benchmarks, are developed by researching your industry’s databases.
When these measurements and ratios are graphed on a frequent basis, the trend lines reveal important performance information. Management must address areas of distress immediately.
Sample Quantitative indicators
| Decrease in: |
Increase in: |
| Cash Flow from Operations (CFFO) | Debt as a % of equity |
| Operating profits | Working capital |
| Net income as a % of Revenue | Days that Payables are Outstanding (DPO) |
| Market share | Days that Sales Rec’bles are Outstanding (DSO) |
| Cash balances | Inventory |
| Revenues |
Non-quantitative indicators
| Non-financial | Financial |
| Staff turnover -> good employees leave | Cash flow runs the business |
| Suppliers withhold goods or demand prepayment | Constantly overdrawn bank accounts |
| Management constantly fire-fighting | Failure to produce financial stmnts / tax returns |
| Operational issues and problems | Failure to manage by financial data |
| Relationships with creditors/suppliers deteriorate | No current operating budget or operating controls |
| Personal guarantees demanded | Broken loan covenants |
These are the tools of turnaround management. Using them every day is Practical Turnaround Thinking.
