Cash Perform Key Offerings Jan 2012

Management Accounting Update Facilitatinging efficiency within the Cash Conversion Cycle that delivers Working Capital Optimisation John Mardle CashPerform Ltd Suite 44 Wrest Park Silsoe, Beds, MK45 4HS, UK Tel: +44 (0) 1525 864940 Email:johnmardle@cashperform.com www.cashperform.com

About us ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Why is Working Capital so important TODAY? ,[object Object],[object Object],[object Object],[object Object],[object Object]

Working capital models of businesses A services business is generally more complex than a manufacturing company. A project type business is even more complex. Contract Tender/ price list Project Management & Scheduling Design Purchasing & subcontracting Inventory, spare parts Services carried out Acceptance Invoicing Order SERVICE BUSINESS Contract Tender Project Management & Scheduling Engineering Purchasing & subcontracting Assembly Goods in transit Civil works, erection & sub contracting Invoicing PROJECT BUSINESS Delivery Commissioning Pre-Acceptance Certificate Final Acceptance Certificate Contract Tender/ price list Material Purchasing & subcontracting Finished goods Delivery Invoicing Order MANUFACTURING BUSINESS Manufacturing

Table of Cash Conversion Activities TCP4 SID T C P Description Account Timing Communication Process Description Term Days via Balance Sheet Acronym S Supply Chain DPO Trade Creditors P2P Purchase to Payment I Inventory Chain DIO Stock/work in Progress I2C Inventory to Cash D Demand Chain DSO Trade Debtors O2C Order to Cash R Reverse Supply Chain Nil Net Zero Net by offsetting Dr/Cr R2C Reverse to Cash-Nil Cash Conversion Cycle Positive WC cashflow CCC Healthy?

CCC – the challenges ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Different types of activities ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Core 5% Support 55% Noise 35% Discretionary 5% ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

More examples of noise drivers ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Capacity, capability, maturity ,[object Object],[object Object],[object Object]

Fresh Thinking ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Optimising Cash Flow ,[object Object],[object Object],[object Object],[object Object],[object Object]

Managing Credit ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

FCM and RRR and CSR ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

CapCut Cash in & Cash out cycles ,[object Object],Payment to Purchase Order Payment of Suppliers Invoices Any Queries from suppliers resolved Purchase Invoices Approved All goods/services receipted and quality Originating Orders Selecting and contracting with supplier Procurement planning Cash Received to Customer Enquiry Bank clearance of money received Cash Received applied to invoice correctly Progress cash collections/ Disputed? Sales Invoice raised per terms of order Service/products/milestones met Order Received and accepted Bid/No Bid quoted and Risk Review? Enquiry received and credit risk assessed? Feedback from Sales/ Marketing and CRM? Full Cost Model /RRR completed BANK ACCOUNTS CASH IN CASH OUT Cash is a net consequence of how payments and receivables are managed in a number of complex processes throughout the business

Analyse process steps Contract Tender PM&S Eng P&SC Assy GIT CW-E&SC Inv Del C-PAC FAC H = High impact M = Medium L= Low L H H H H M M M M Root Cause Matrix Analyse process steps in reverse sequence of the working capital model and complete the matrix of upstream stages that cause problems further downstream. In this example problems at the ‘Contract’ stage have been found to have a high impact on later stages. . Contract Tender Project Management & Scheduling Engineering Purchasing & subcontracting Assembly Goods in transit Civil works, erection & sub contracting Invoicing Working Capital Model of the business Delivery Commissioning Pre-Acceptance Certificate Final Acceptance Certificate Contract As is… Contract Tender PM&S Eng P&SC Assy GIT CW-E&SC Inv Del C-PAC FAC H M H ,[object Object],[object Object],[object Object],[object Object],[object Object],Investigation to uncover root causes.

10 Common Working Capital Change Mistakes ,[object Object],[object Object],[object Object]

Common Working Capital Change Mistakes contd ,[object Object],[object Object],[object Object],[object Object]

Common Working Capital Change Mistakes contd ,[object Object],[object Object],[object Object]

Common Working Capital Change Mistakes continued ,[object Object],[object Object],[object Object]

…… . And possibly the 11 th ‘mistake’ Poor or non existent reporting of Working Capital ,[object Object],[object Object],[object Object]

Reporting Measures of Working Capital ,[object Object],[object Object],[object Object],[object Object]

Recent Quotes ,[object Object],[object Object],[object Object],[object Object]

Thank you for listening- Any Questions? CashPeform Ltd Suite 44, Wrest Park Silsoe, Beds, MK45 4HS Tel : +44 (0) 1525 864940 www.cashperform.com johnmardle@ cashperform.com

Cash Perform Key Offerings Jan 2012

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