credit availability and the importance of optimizing ... 2013/speakers... · credit availability...
TRANSCRIPT
![Page 1: Credit availability and the importance of optimizing ... 2013/Speakers... · Credit availability and the importance of optimizing working capital SIMON ROCKCLIFFE, Senior Manager,](https://reader033.vdocuments.site/reader033/viewer/2022060220/5f0721147e708231d41b734e/html5/thumbnails/1.jpg)
Credit availability and the importance of optimizing working capital
SIMON ROCKCLIFFE, Senior Manager, Working Capital Advisory Services, Ernst &Young (Moderator) JOHN FORESTER, CFO, DBG Canada RON MURPHY, CFO, Aux Sable JIM McKILLOP, CFO, ATB Financial
![Page 2: Credit availability and the importance of optimizing ... 2013/Speakers... · Credit availability and the importance of optimizing working capital SIMON ROCKCLIFFE, Senior Manager,](https://reader033.vdocuments.site/reader033/viewer/2022060220/5f0721147e708231d41b734e/html5/thumbnails/2.jpg)
► Short term: 89% suggest short term financing very/somewhat readily available and forecast to improve
► Long term: 81% suggest long term financing very/somewhat readily available and forecast to improve
► Difficulty: Small companies rated a challenge to obtain credit (>20% very difficult). Top issue – unattractive covenants and conditions (46%)
► Satisfaction: 69% of companies satisfied with their current bankers
Credit availability and working capital optimization Survey highlights – Credit Availability:
![Page 3: Credit availability and the importance of optimizing ... 2013/Speakers... · Credit availability and the importance of optimizing working capital SIMON ROCKCLIFFE, Senior Manager,](https://reader033.vdocuments.site/reader033/viewer/2022060220/5f0721147e708231d41b734e/html5/thumbnails/3.jpg)
► Performance: Only 39% of companies recorded an improvement
► Focus: 48% undertook a specific program; others incorporated in other initiatives
► Success: Of those that applied focus, 69% recorded positive results
► Why: internal FCF targets, pay down debt, investment (system, M&A)
► Conflict: cost reduction, systems, M&A, re-organization, growth
► Size matters: Small companies have more focus but worse results
► Visibility: Remains a monthly exercise – 76% review monthly or worse
► Incentivization: 31% with FCF component and growing
Credit availability and working capital optimization Survey highlights – Working Capital:
![Page 4: Credit availability and the importance of optimizing ... 2013/Speakers... · Credit availability and the importance of optimizing working capital SIMON ROCKCLIFFE, Senior Manager,](https://reader033.vdocuments.site/reader033/viewer/2022060220/5f0721147e708231d41b734e/html5/thumbnails/4.jpg)
Collections entitlement
Dispute management
Supplier payment terms
Demand forecasting
► Visibility and calculation of entitlement gap ► Segmented / differentiated portfolio approach ► Cross functional alignment
► Many slow payments due to internal issues ► Identify, escalate, eradicate ► Clearly define roles and responsibility
► Understand spend leverage / consolidation to achieve category leading practice
► Utilize tenders with defined standard terms ► Move non-contract vendors to standard terms
► Differentiated approach based on SKU characteristics ► Collaborate with customers ► Ensure rigour in S&OP processes
Major drivers
![Page 5: Credit availability and the importance of optimizing ... 2013/Speakers... · Credit availability and the importance of optimizing working capital SIMON ROCKCLIFFE, Senior Manager,](https://reader033.vdocuments.site/reader033/viewer/2022060220/5f0721147e708231d41b734e/html5/thumbnails/5.jpg)
Invoice timeliness
System configuration & compliance
P-Cards / V-cards
Inventory rebalance
► Cut-offs; ship/service to invoice date/dispatch ► Details recorded on invoice (set expectations) ► Accuracy supplants timeliness
► Master file compliance with contracts ► Batching protocols ► Trigger (goods, invoice, invoice receipt, promise)
► Maximize credit availability; pay on due date ► Identify all suppliers accepting credit card ► Multiple cards = multiple billing cycles
► Quick win – identify imbalances ► Prioritization of excess ► Establish dynamic process to change with demand
Tactical opportunities
![Page 6: Credit availability and the importance of optimizing ... 2013/Speakers... · Credit availability and the importance of optimizing working capital SIMON ROCKCLIFFE, Senior Manager,](https://reader033.vdocuments.site/reader033/viewer/2022060220/5f0721147e708231d41b734e/html5/thumbnails/6.jpg)
► Leadership: Tone set from the top; not just a finance initiative
► Bottom up approach: Structured approach to validating and prioritizing portfolio of initiatives
► Embed: Ensure cash flow and working capital impacts are a component of all internal initiatives and business decisions
► Measure: Focused set of metrics to track performance and benefits accrued
► Sustain: Embed change agents into organization for continuous improvement
► Motivate: Consider incentivization and bonuses (does not need to be large)
Critical success factors
Majority of companies can release 10-20% from WC while still retaining cost and service goals
![Page 7: Credit availability and the importance of optimizing ... 2013/Speakers... · Credit availability and the importance of optimizing working capital SIMON ROCKCLIFFE, Senior Manager,](https://reader033.vdocuments.site/reader033/viewer/2022060220/5f0721147e708231d41b734e/html5/thumbnails/7.jpg)
Panel
► John Forester - CFO, DBG Canada Ltd
► Jim McKillop - CFO, ATB Financial
►Ron Murphy - CFO, Aux Sable
![Page 8: Credit availability and the importance of optimizing ... 2013/Speakers... · Credit availability and the importance of optimizing working capital SIMON ROCKCLIFFE, Senior Manager,](https://reader033.vdocuments.site/reader033/viewer/2022060220/5f0721147e708231d41b734e/html5/thumbnails/8.jpg)
Polling
► Six questions
► Voting devices at your seat
► First valid entry will be accepted
► Start with a demographics question...
![Page 9: Credit availability and the importance of optimizing ... 2013/Speakers... · Credit availability and the importance of optimizing working capital SIMON ROCKCLIFFE, Senior Manager,](https://reader033.vdocuments.site/reader033/viewer/2022060220/5f0721147e708231d41b734e/html5/thumbnails/9.jpg)
Q1: Which option below best describes your company?
0%
0%
0%
0%
0% 1. SME Private
2. SME Public
3. Large Private
4. Large Public
5. Other
![Page 10: Credit availability and the importance of optimizing ... 2013/Speakers... · Credit availability and the importance of optimizing working capital SIMON ROCKCLIFFE, Senior Manager,](https://reader033.vdocuments.site/reader033/viewer/2022060220/5f0721147e708231d41b734e/html5/thumbnails/10.jpg)
Q2. In your opinion, how would you rate the current level of credit availability?
1 2 3 4
0% 0%0%0%
1. Very available
2. Remained about the same
3. Declining
4. Do not know
![Page 11: Credit availability and the importance of optimizing ... 2013/Speakers... · Credit availability and the importance of optimizing working capital SIMON ROCKCLIFFE, Senior Manager,](https://reader033.vdocuments.site/reader033/viewer/2022060220/5f0721147e708231d41b734e/html5/thumbnails/11.jpg)
Q3. What is the primary way excess cash is being utilized within the business?
1 2 3 4 5 6
17% 17% 17%17%17%17%1. Invest in organic growth
2. M&A
3. Return to shareholders/ pay debt
4. Improving systems / infrastructure
5. Multiple of the above
6. Other
![Page 12: Credit availability and the importance of optimizing ... 2013/Speakers... · Credit availability and the importance of optimizing working capital SIMON ROCKCLIFFE, Senior Manager,](https://reader033.vdocuments.site/reader033/viewer/2022060220/5f0721147e708231d41b734e/html5/thumbnails/12.jpg)
Q4. Has working capital and cash management become more or less of a priority in the last 12 months?
0%0%0%
1 2 3
1. Higher priority
2. Stayed the same
3. Lower priority
![Page 13: Credit availability and the importance of optimizing ... 2013/Speakers... · Credit availability and the importance of optimizing working capital SIMON ROCKCLIFFE, Senior Manager,](https://reader033.vdocuments.site/reader033/viewer/2022060220/5f0721147e708231d41b734e/html5/thumbnails/13.jpg)
Q5. What degree do you feel you have visibility into your organization's working capital and cash flow performance?
0%0%0%0%
High Med Low None
1. High
2. Medium
3. Low
4. None
![Page 14: Credit availability and the importance of optimizing ... 2013/Speakers... · Credit availability and the importance of optimizing working capital SIMON ROCKCLIFFE, Senior Manager,](https://reader033.vdocuments.site/reader033/viewer/2022060220/5f0721147e708231d41b734e/html5/thumbnails/14.jpg)
Q6. How would you say your organization's functional areas are aligned with finance in the importance of cash flow?
0%
0%
0%
0%
1. Highly aligned
2. Somewhat aligned
3. Minimally aligned
4. Not aligned
![Page 15: Credit availability and the importance of optimizing ... 2013/Speakers... · Credit availability and the importance of optimizing working capital SIMON ROCKCLIFFE, Senior Manager,](https://reader033.vdocuments.site/reader033/viewer/2022060220/5f0721147e708231d41b734e/html5/thumbnails/15.jpg)
Q&A