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Cash & Liquidity Management
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Strategies for Centralisation, Visibility, and Control in Uncertain Times

by Mike Ballet, Group Treasurer and Credit Manager, Aviapartner Holding NV

When I arrived at Aviapartner in June 2008, the group faced a liquidity crisis, with fully utilised credit facilities and breached financial covenants. The first task was to create a new finance team, comprising Kris Geysels, CFO, Carol Struyf, Group Controller, Ronny De Pooter, Group Consolidation and myself, which was fully supported by the new board executives, Laurent Levaux, CEO and Kris Geysels. Following this, it was imperative that we embarked on immediate negotiations with unions, banks, investors and the new management to secure the company’s future. In consequence, based on the efforts of all these parties, we formulated a new strategy that included a complete restructuring of our debt and an increase of capital, resulting in a positive net cash position of EUR12.0m by the end of 2009 compared with a negative cash position of EUR230.9m at the end of 2008.

A new cash management framework

An important element of this solution was the restructuring of our cash management arrangements. Historically, the company had a decentralised cash management structure, with multiple banks and accounts, which meant that significant amounts of time were spent maintaining these accounts and collating information, as opposed to optimising the cash cycle and credit means. Visibility over balances was limited and it was impossible to make decisions based on up-to-date information. We had around EUR5m ‘trapped’ in accounts, compromising our liquidity efforts, with inefficient processes that were subject to error. As the financial crisis unfolded, this situation was exacerbated by changing banking partners and products that were altered or no longer supported.

To address these issues, we decided to embark on a new cash management strategy to achieve a series of key objectives:

  • Unlock ‘trapped’ cash to enhance access to cash;
  • Simplify account structure to reduce maintenance and allow easier visibility over balance information;
  • Improve business processes with a view to achieving efficient straight-through processing (STP) and automated reconciliation;
  • Encourage greater standardisation of treasury activities at a group level.