A Crash Course in Working Capital

Karen Daniel, CFO of privately held Black & Veatch, is a stickler for GAAP and wants every manager to understand how their daily tasks affect corporate working capital.

Black & Veatch CFO Karen Daniel got started early in finance. As a high school student, Daniel, now 51, worked for the Internal Revenue Service helping to process tax returns. Maybe that’s why she likes the idea of mentoring employees in the ways of finance, right from the start.

Indeed, as part of its ongoing management training, Black & Veatch, a privately-held global engineering and construction company, requires managers to attend a session that focuses on value creation. Daniel points to Steve Stark, a project manager with responsibilities for engineering, procurement, construction, and now working capital. “When I took the … training it helped me understand the bigger picture of how the financial elements of a project fit into the overall company’s financial objectives,” says Stark. He adds that the training expanded his perspective on how meeting project goals can affect the company’s bottom line “beyond the profit/loss metric typically monitored at the project level.” For instance, Stark says his “value-based management” training covered how cash flow directly affects the company’s working capital, and how “timely cash management” helps fund general operations and investment in other parts of the business.

As CFO, who heads a 200-person finance department, Daniel believes that driving the “value creation” message to all levels of the company helps keep the employee-owned Black & Veatch on track.

Daniel, who started her career at KPMG Peat Marwick before moving to Black & Veatch’s internal audit group in 1992, points out that her company has very little debt on its balance sheet and has a credit facility if needed. But like many businesses, Black & Veatch, which generates $3.2 billion in revenues annually, has been affected by the global financial crisis. Yet, while its revenues and earnings were down in 2008, the company remains profitable. (Daniel shared net income and change in revenue numbers with CFO.com on the condition that the private-company metrics would not be published.)

BV CFO KDaniel “Our metrics are basic — earnings and cash — but they have a significant impact … what’s most important is that every project team has the responsibility of understanding and performing against their working capital position” — Black & Veatch CFO Karen Daniel

CFO.com talked with Daniel about heading the finance function at a private company, making her way through the current financial crisis, and giving everyone a smidgeon of corporate finance training.

The whole economy sunk and took corporations with it this year. What affected Black & Veatch’s numbers most?
I think you see there is the reflection of rising costs in our industry around the equipment and various other things that we use to execute our projects, as well as rising labor costs.  The slight dip in revenue is, I’m sure, the reflection of the economy beginning to slow down a bit in 2008.

Do you your numbers for 2009 look stronger?
If you’re defining ‘stronger’ as more profitable, yes. In 2009, I think you will continue to see top line declines in our industry to some extent. But companies like ours that focus on profitability have found ways to increase profitability compared to last year by operating more efficiently.


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