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Your January feature “All Eyes on Treasury” was excellent. Regarding your point about banking relationships, we have found that many companies are still overbanked with what could be “inefficient” banks; however, many companies, especially those that operate in a decentralized manner, are simply unaware of who they bank with.
In a recent survey we performed among 250+ treasury professionals we found that 8 to 10 percent did not even know how many banks they used. This percentage increases when one focuses on just the use of international banks.
Given all that the traditionally small treasury staff is asked to perform, it remains difficult to answer the basic question, “It’s 10 a.m.: Do I know where in the world my cash is?” If the company cannot produce an accurate diagram of its banking relationships, then its knowledge of its global cash position and the investment/borrowing decisions that flow from it will be flawed.
Bruce Lynn, CTP
Bad News, Good News
Just because stocks are cheap, that’s no reason to buy now (“And Now for the Good News…” January).
There is no effective, meaningful P/E. “E” is now nonexistent! “Past performance is not a guide…” as the Wall Street saying goes. Fourth-quarter earnings have not been reported, and with increasing bankruptcy filings and continuous negative economic signs and warnings about 2009, cash equivalents are the only safety zone for investors. Even with massive federal pump priming we will be amazingly lucky if the economy “bottoms out” by early 2010.
Leon Haller is a former Wall Street corporate analyst, business-school lecturer, and author of Making Sense of Accounting Information.
People Get Ready
“Which One When?” (January) was a nice article, but you forgot one big change. You didn’t mention the recasting of U.S. generally accepted accounting principles — which is almost upon us.
Whether we finally converge with international financial reporting standards in 2014 or later, as it stands right now we are all about to be hit by a massive change. And the change is named Codification.
I feel that most professionals are still unaware of the extent of these changes and may well be stunned to learn of the complete reconstituting of U.S. GAAP, which is scheduled to take effect this July. Perhaps I will look back and find that I was an alarmist, but I am amazed at how this is running under the radar and is viewed by so many as only an academic undertaking.
John Anderson, CPA
We know from studying trade credit receivables practices all over the world that most corporations, large and small, don’t have credit-risk procedures any more sophisticated than the subprime lenders did (“Rethinking Risk,” January). If the customers passed a simple “in business” check, they got credit. Trade creditors have historically focused on selling more and not caring or worrying about credit risk. Now companies are realizing that they need to understand the risk of their customers’ defaulting on payment.
It no longer is enough to just have a “credit file” with a simple credit report. Companies are demanding yearly profiles on their customers, detailed financials on the large risks, and proof of cash-flow strength from all of their customers to assess risk.
It’s about time.
The Credit Department Inc.
Understanding Fossil-Fuel Betas
I read with great interest your article on fossil-fuel betas (“What Goes Down Will Come Up,” December 2008).
I am the energy director for Macy’s and am in charge of our Risk Management Program. I have struggled to communicate this complicated world in terms that CFOs can understand. You provided the first financially cogent piece on this critical area, which will return with a vengeance in late 2009 or mid 2010, due to the dollar printing presses running overtime. The recent fall of the dollar may be just the beginning.
Timothy G. Leigh
Director, Energy Services
More Wireless Tips
Your article “Off the Hook” (InTech, December 2008) gave some good, general tips to manage the wireless expense. But these ideas are just the tip of the iceberg in terms of reducing and managing this expense. I would like to add five more opportunities to reduce costs that will provide additional value to your readers:
1. In addition to consolidating carriers, ask the carrier for all available plans. The best deals aren’t always advertised. For many companies, a “pooled minutes” or “shared minutes” program across all employee devices will be the optimal plan.
2. Negotiate the rate on overage minutes to match the rate of the pooled- or shared-minutes plan rate.
3. Ask the carrier to block pay-per-use services like text messaging, picture messaging, and Internet browsing on employee phone devices.
4. Avoid the cell-phone insurance — it’s almost never worth the cost.
5. If a company has seasonality in wireless usage, carriers offer companies the option to suspend usage and thus the monthly plan charges on wireless devices for a nominal fee or no charge at all.
Expense Reduction Analysts
In our December 2008 story “And in This Corner, the Price-Fighter,” we mistakenly included Kohl’s among a list of retailers that have entered Chapter 11.
In our January story “The Year That Was,” we failed to note that Wells Fargo, not Citigroup, ultimately acquired Wachovia.