Optimization of the company's cash flow
This book is about the company's treasuries and financial management, more specifically; it shows how a company can manage its treasury in an efficient and short way.
This book is about the company's treasuries and financial management, more specifically; it shows how a company can manage its treasury in an efficient and short way.
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grouping by nature. In principle <strong>the</strong> frequency and <strong>the</strong> time limit for payment are well known. Quite <strong>of</strong>ten, <strong>the</strong>re<br />
remains uncertainty as to <strong>the</strong> amount that can be still quite close. The forecast <strong>of</strong> expenditure on financial and<br />
investment operations stems from <strong>the</strong> financing plan. The liabilities accounting complete this approach.<br />
(b) ACCRUAL OF LIABILITIES:<br />
Accounting for commitments is intended to allow adjustment <strong>of</strong> budget estimates. It is based on achievements: <strong>the</strong><br />
commitments received or given. It reveals from <strong>the</strong> source, variances between budgeted or revenue incurred or<br />
budgeted spending and expenditures<br />
Non-operation movements are not fix. Any company is able to identify all born commitments and <strong>the</strong>ir impact on<br />
<strong>cash</strong> <strong>flow</strong> accurately. Movements <strong>of</strong> farms, on <strong>the</strong> contrary, are analyzed globally, comparing <strong>the</strong> development over<br />
time <strong>of</strong> <strong>the</strong> commitments <strong>of</strong> expenditure and revenue from a common date.<br />
Two parameters influence <strong>the</strong> movements <strong>of</strong> availability:<br />
The amount <strong>of</strong> <strong>the</strong> commitment,<br />
The time between <strong>the</strong> birth <strong>of</strong> commitment and its transformation into <strong>cash</strong>.<br />
These information are only averages but resulting from <strong>the</strong> comparison between commitments and payments<br />
actually made. The same analysis is performed for <strong>cash</strong> receipts. We will <strong>the</strong>n search for "equalities between money<br />
supply" regardless <strong>of</strong> conduct specific to each elementary operation constituting those 'masses '. Also has interest in<br />
<strong>the</strong> continuation <strong>of</strong> <strong>the</strong> analysis, to seek <strong>the</strong> causes <strong>of</strong> <strong>the</strong> dispersion <strong>of</strong> individual behavior around <strong>the</strong>se averages to<br />
avoid errors <strong>of</strong> forecasts. The gap analysis allows any time corrective actions necessary to ensure <strong>the</strong> solvency <strong>of</strong> <strong>the</strong><br />
firm.<br />
The method <strong>of</strong> forecast revenues-expenses, despite his great interest does not fully satisfaction.<br />
3.1.2 - LIMITATIONS OF THE METHOD.<br />
Experience shows that this method has major shortcomings. We will make in this regard four remarks.<br />
1 - THE CASH FLOW FORECASTS ARE UNCERTAIN.<br />
But this uncertainty does not have <strong>the</strong> same nature as it's more or less distant horizon data.<br />
(a) THE DATA IN THE VERY SHORT TERM:<br />
Most operations that result in a movement <strong>of</strong> <strong>cash</strong> are already involved. As a result, <strong>the</strong> Treasurer may <strong>the</strong>oretically<br />
have all necessary information. In fact, it will have that mass <strong>of</strong> information. First, because <strong>the</strong> internal information<br />
<strong>of</strong> a business system is generally not organized so all this mass information arrive. Then, it can appear to <strong>the</strong> eyes <strong>of</strong><br />
those responsible for <strong>the</strong> cost <strong>of</strong> <strong>the</strong> transmission <strong>of</strong> <strong>the</strong> information is disproportionate to <strong>the</strong> gain (or <strong>the</strong> economy)<br />
expected a certain forecast. It should be noted that <strong>the</strong> improvement <strong>of</strong> <strong>the</strong> input <strong>of</strong> information is <strong>the</strong> condition first<br />
<strong>the</strong> realization <strong>of</strong> good <strong>cash</strong> <strong>flow</strong> forecast<br />
In addition, <strong>the</strong> cost <strong>of</strong> a bad <strong>cash</strong> management can be as compromise or at least strongly affects <strong>the</strong> pr<strong>of</strong>itability <strong>of</strong><br />
<strong>the</strong> firm. Anyway, <strong>the</strong> use <strong>of</strong> certain statistical forecasting techniques can replace when necessary, expensive looking<br />
for additional information about committed transactions.<br />
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