Cash & Liquidity Management
Published  11 MIN READ
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Rapid Returns in Receivables

by Helen Sanders, Editor

Those who remember the late 1980s and who also grew up in the United States (I can feel my audience diminishing as I write!) may remember Ken Hakuta, better known as ‘Dr Fad’, TV personality and inventor – for those who missed out, he’s featured on the old VHS ‘I Love the ‘80’s: 1983’. I bet you never expected to pick up that sort of trivia in a treasury publication. I haven’t seen it, in case you were wondering. Anyway, amongst (I’m sure) very many sensible comments made by ‘Mr Fad’, one struck me as actually being quite relevant:

“Lack of money is no obstacle. Lack of an idea is an obstacle.”

While I am not suggesting that we all send our banknotes fluttering from a top storey window (after all, many of us might feel that this is already the effect of much of the current economic uncertainty) there are significant ways in which treasurers can substantially improve their liquidity and working capital with rapid return on investment. The key is not just to throw more money and more resources at a problem, but to think creatively about addressing challenges. In doing so, treasurers can achieve a return on investment which contributes directly to the company’s bottom line. Focusing on receivables is a prime example of where treasurers can act creatively to enhance liquidity and add economic value to the company. The watchwords here are Centralisation, Optimisation, Leverage and Protection. But what does these mean in practice?


According to a recent survey conducted by GTNews in association with SEB (‘Is Corporate Cash Management Changing?’ 19 July 2007) 43% of companies have a decentralised approach to receivables. The survey included a high proportion of SMEs and domestic companies, and according to research such as the Treasurers’ Benchmark of companies with a turnover above $1bn the percentage of companies which have not fully centralised their collections is far higher. Approximately 65% of larger multinational companies still have partially decentralised collections and only 5% have fully centralised (source: Treasurers’ Benchmark). However, there is a significant drive to centralise collections amongst companies of all sizes, either globally or regionally, depending on the structure of the organisation. While short-term priorities differ amongst firms, it appears that only 15% of those with decentralised collections ultimately intend to maintain this arrangement in the future.