The New Cash Managers

With their companies stung by the credit crunch, finance chiefs are buying software to seize control of their cash and gain leverage with their lenders.

Driven by the downturn, CFOs and treasurers are increasingly switching their companies’ financial yardsticks from earnings to cash. As a result, they’re tracking the flow of cash into and out of every nook and cranny of their companies’ operations. And the cash-management buzzword of the day is “visibility.”

But many companies have been ill-equipped to “see” into the bank accounts of their far-flung subsidiaries. Alerted by the disastrous credit crunch that’s only now starting to recede, the difficulty in getting any yield at all for their investments, and the volatility of the U.S. dollar, treasurers and senior finance executives are reaching for more control of their cash management. One step: buying computer tools to be able to view subsidiaries’ cash positions on the executives’ desktops.

Indeed, companies such as Samsonite, the well-known, privately held luggage vendor, have dived into the market for cash-management computer systems. “Everybody wants to know where their cash is. Historically, this company used to have to wait for a monthly close to get a view on cash. But that’s not quick enough anymore. You really need to know on a weekly basis, and part of your culture is making sure everybody understands where their cash is,” says Kyle Gendreau, the company’s CFO. Samsonite’s U.S. retail unit is set to emerge from Chapter 11 protection by the end of this month.

Last November the downturn began to cut into the revenues of the travel industry on which Samsonite depends. With the company facing the likelihood of liquidity problems, it changed its guiding metrics from earnings and earnings before interest, taxes, depreciation, and amortization to cash flow. “We effectively shifted everybody’s focus to cash management and cash forecasting. So at a certain point, your cash flow becomes a more important measure when you’re in a crisis than a p&l,” says Gendreau. “A lot of companies made that shift.”

In tandem with the change in culture came the installation of new cash-management processes. Speaking to CFO from Luxembourg earlier this month, Gendreau said the company has integrated the cash management of the entire company, largely by setting up a 13-week cash-forecast system with weekly reporting. “It’s become an encompassing way of how we operate today,” he said of the system.

Although at first the tool supplied data in the form of Excel spreadsheets, the company is moving toward more automated software. Samsonite is replacing the spreadsheets with Cognos TM1, a Web-based tool that enables users to easily view forecast updates on a weekly basis. “As we put in this automation tool, it will take a little bit out of the busy work out of putting this stuff into Excel, and it will allow people to focus on the qualitative pieces” of managing cash, said Gendreau.

Similarly, spurred by volatile global financial conditions, Norsk Hydro, a New York Stock Exchange–traded Norwegian aluminum and renewable-energy giant, is integrating its treasury systems. “The increased volatility of [the U.S. dollar] has increased Hydro’s focus on currency risk and currency management. Also, forecasting of cash reserves and managing counterparty risk are increasingly important,” Peik Norenberg, the company’s senior vice president of corporate finance, said in an e-mail.


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