Treasurers Still Struggling to Be Heard in the Boardroom.Business Editors NEW YORK--(BUSINESS WIRE)--May 6, 2003 Liquidity Improvement a Challenge, Says Bank of America
Bank of America (NYSE: BAC TYO: 8648 ) is the largest commercial bank in the United States in terms of deposits, and the largest company of its kind in the world. Global Treasury Services Treasury services is a function of an investment bank which provides transaction, investment and information services for chief financial officers, treasurers. Treasury services concentrates and invests client money, and provides trade finance and logistics solutions as well as In a recent Bank of America Global Treasury Services (GTS GTS abbr. gas turbine ship ) survey, treasurers who rated their corporation's performance as sub-standard in key working capital areas attributed this performance to the degree (or lack) of influence that treasury has over payables, receivables and inventory. More than 30 percent of all treasurers surveyed feel that they have sub-average influence on the payables cycle, and the corresponding figure for their degree of control over inventory is over 60 percent. When asked what they feel are the principal barriers to increasing internal liquidity, 50 percent of respondents feel that lack of coordination across working capital processes is a factor. There is a similar dichotomy regarding a lack of influence over business units and inadequate information/systems. "A number of respondents cite lack of commitment from senior management as the key barrier to effecting improvements in working capital management. As with most corporate initiatives, if the boardroom approval is lacking, making any appreciable headway on liquidity issues will always be an uphill struggle. While many treasurers have diligently attempted to educate the rest of the corporation as to their role, this perhaps isn't having sufficient impact on the boardroom," said David Jackson David Jackson is the name of several notable men:
New Measurements as Emerging Trend Within Bank of America's Aerarium forum, treasurers from some of the world's largest multinational corporations
"Most company directors may not be acquainted with the intricacies of liquidity management, but if informed that achieving a figure of X for a particular metric will return a bottom line saving to the corporation of Y hundred million dollars - their interest is at least likely to be piqued. Improved liquidity metrics - not just in terms of benchmarks comprehensible to treasury, but also headline measures - that can be readily understood by non-specialists is having an impact in larger corporations," said Mr. Jackson. Some of the treasurers within Aerarium have instituted additional proprietary liquidity measures. One member uses a concept called 'linearity of orders', which addresses the propensity of sales teams to push orders through at the end of the quarter to achieve sales targets. This tendency can easily add four or five days to DSO See CSO. (days sales outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). ), so the treasury in question has made maintaining steady linearity of orders a component in sales teams' compensation calculations. A number of survey respondents relied on forecasts of free cash flow as means of measuring liquidity / working capital performance. Motivational liquidity A key factor in the success of the linearity of order measure is that it disseminates a liquidity metric outside treasury and also ties it to a financial incentive. "By adding the motivation element to the equation, it effectively transforms liquidity management from being something traditionally seen as just the treasury's problem into a concept that is an enterprise-wide concern," said Mr. Jackson. However, the idea of basing incentives on liquidity metrics is by no means universal - 31 percent of recent survey respondents stated that their company levied capital charges on inter-company lending, and only 45 percent tied cash flow targets to bonus calculations. Last Days of DSO? In the recent survey, 88 percent of respondents said that they were still using DSO as a liquidity metric. "While DSO may be widely adopted, it is in itself a fairly restricted measure that offers only limited insight into (and control of) underlying liquidity problems. Other popular methods also have their shortcomings A shortcoming is a character flaw. Shortcomings may also be:
Though respondents' comments indicated an interest in discovering more about improved liquidity metrics, DSO still attracts a high satisfaction weighting, with 67 percent of those polled ranking it as a good or excellent liquidity measure. Modified versions of DSO (rolling, country-weighted, etc.) attracted a similar satisfaction score, while other metrics such as DSO/DPO ratio were both less frequently used and less highly rated (DPO DPO Direct Public Offering (finance/investment) DPO Direct Public Offering DPO District Police Officer (Pakistan) DPO Days Payables Outstanding DPO Document Process Outsourcing DPO Days Past Ovulation = days payable outstanding). "Comparing and contrasting our survey results with our Aerarium feedback is quite revealing. The treasury departments of larger corporations are reaching a pivotal time in history and are truly beginning to make those last strides into the boardroom. The success that our Aerarium members have experienced will eventually flow out to the rest of the industry. The results of a similar survey will probably look very different in the next few years," concluded Mr. Jackson. About Aerarium Aerarium, the "Global Forum on Working Capital," was created in 2002 by Bank of America to develop leading edge thinking on treasury issues. Aerarium members benefit by being in the forefront of applying best of breed practices to their businesses. Aerarium facilitates idea sharing, debate, innovation and initiative on issues related to working capital management. About Bank of America GTS The Global Treasury Services (GTS) division of Bank of America provides integrated working capital management and treasury solutions to clients that include multi-nationals, correspondent banks, governments and global 1000 businesses. GTS services include treasury management, trade finance, foreign exchange, short-term credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities and short-term investing. Bank of America GTS is the number one treasury and trade services provider in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . Unique to Bank of America, the GTS Global Banking System (GBS See GB/sec. ) is the only common technology platform for offshore banking functions, providing global support to over 500 units in 40 locations with over 2,500 users. Bank of America stock (ticker: BAC BAC abbr. blood alcohol concentration ) is listed on the New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , Pacific and London stock exchanges London Stock Exchange London marketplace for securities. It was formed in 1773 by a group of stockbrokers who had been doing business informally in local coffeehouses. . The company's Web site is www.bankofamerica.com. News, speeches and other corporate information may be found at www.bankofamerica.com/newsroom. |
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