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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 2005 Bankruptcy Act was written to rein in overspending consumers, but the most current data (12/31/07) show that, rather than buying luxuries, 14% of Chapter 13 filers drained their resources trying to finance their businesses. Professor Robert Lawless of Univ. of Illinois School of Law spoke to the American Bankruptcy Institute about his latest research. We recommend that, rather than pushing lenders to weaken credit standards, business owners need to learn how to put the tools of turnaround management to work every day.
To improve their companies’ performance, managers focus on activities that increase net income. This study finds that marginal reductions in working capital are as effective at improving performance as are significant increases to net operating profit. Given the current economic climate, reducing working capital may be management's most reliable option for increasing firm value in 2010. It also sends important signals to stakeholders about management's focus on efficiency.
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PWC's latest European Working Capital study found that its sample of firms showed no improvement in working capital as a % of net assets since 2004. Decreases in DSO and DPO have been observed, but these too will hit a limit. Researchers suggest that supply chain optimization may be the last remaining frontier for companies to significantly reduce working capital. This will not be a quick and easy win.
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Hackett Groups reports that 80% of firms are unable to forecast 13-week cash flow within 5% accurracy.
Only one in three can accurately forecast their earnings, due to unknowns in the sales and expense categories.
Top performers have five characteristics in common: the simplest of the five is to "develop closer vendor and customer relationships." The other four require substantial organizational effort. Management and boards should throw their weight behind these initiatives.
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According to Mr. Gross’s September newsletter, we are into a New Normal – “a period of time in which economies grow very slowly as opposed to growing like weeds; in which profits are relatively static; in which the government plays a significant role in terms of deficits and re-regulation and control of the economy; in which the consumer stops shopping until he drops and begins, as they do in Japan, saving to the grave.”
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