FINANCES - 20 Measures in the scope of Finances of the company

When a company is in the middle of a crisis, the problems of all type do not stop to grow to him, as if some were fed others. The personnel questions affect to those of production, these to the commercial ones, and these as well to the financiers. And the financial problems increase the commercial problems, entering a vicious circle.

It is impossible to only stop and to solve a crisis adopting measured financiers; it is necessary to combine them with economic decisions that attack the problems in their root, and rearrange the account of results towards a footpath of benefits. And there is no miraculous medicine either when the inflate-capitalization problem is without solving: it is necessary to contribute capital more if it is desired to continue with the company.

Shelp the previous thing, also it agrees to remember that there are measures of financial character that are very useful to resist a crisis situation, and even they are it more for anticipating themselves and avoiding it.

The objective of these notes is to summarize in some lines some of the measures that can take a company to fortify their financial management and to optimize their treasury, with effects in four scopes:

1. to reduce the needs of operating capital

2. to reduce the financial costs generally

3. to reduce the human resources dedicated to the financial processes

4. to improve the control of these processes

These measures can group in five chapters, following the five main areas of the financial management:

a) Organization of the treasury

b) Operations of collection and payment

c) Banking policy

d) Financing

e) Control of the financial risk


Organization of the treasury

1. To audit the financial processes to quantify in currencies the cost of the inefficiency of the same.

To car- establish a plan of improvement of these processes, being imposed a quantified objective of improvement. It is a always profitable investment, because in the receive-investment-financing-payment processes many inefficiencies usually are accumulated. As far as the process of collection of clients, to quantify the average period of delay in the collection that suffers the company and its causes, and to establish a plan of measures revisers and a quantified objective of improvement; for example, we acquired in average 25 days after the predicted victory and are going to reduce this delay to 10 days.


2. To create or to reinforce the function of the treasurer or “cash manager”, separated of the accounting.

To create or to reinforce the figure of a person in charge of risks of clients or “credit manager”, that determines and controls the risk limits to grant to the clients, and who do not depend on the Commercial Director. To create a Committee of Risks, that includes the people in charge commercial and financial.


3. To rationalize the bank accounts in view, reducing the number of banks and eliminating the accounts replacing them by credit accounts.

In this way idle” balances of treasury are avoided “, and crossings between accounts are avoided.


4. As far as possible to centralize the management of the treasury, as minimum the decisions, and according to the circumstances, also the banking balances and the collections and payments that remain decentralized.

The done good centralization is very beneficial for all the organization. It must be carried out gradually.


5. To make a social security management (anticipated) of the treasury.

With an annual budget per months, reviewed perhaps semester, on the basis of the general budgets of the exercise, and a forecast to short (for example to 3 months), that makes specific plus the treasury needs. To jeopardize to the high direction in this process, so that he is trustworthy.


6. To mechanize the control of the banking position in date value, and the management of the collections and payments, and to integrate the processes with the electronic bank, with the aim of obtaining better data and major productivity.

To assure that the systems of management of accounts to receive and to pay handle essential financial concepts: date of victory, descries, condition of payment, etc.


Operations of collection and payment

7. To calculate the marginal value of the money for the company, and to communicate this index (for example 8%) to the personnel.

Especially to those people implied in the management of the circulating one, so that they consider it in his decisions: product managers, salesmen, delegates, commercial heads of sales, office staff, commercial director; suppliers, buyers, heads of warehouse, director of purchases, director of logistic…

To establish, if it fits, a program for the active advantage of the difference between the value of the money for the company and the value for its clients and suppliers. To review the policies suddenly payment to clients and of suppliers. To avoid abusive conditions and to take advantage of the options that are more interesting.


8. To analyze the collection processes to trim the term between victory and installment in value.

In order to enter checks before, for example, to enter them after entering them not before and. To cause that they send them to a post-office box if thus we can win someday. And to grant powers of endorsement of people implied to the maximum in the entrance process, so that the checks are not without entering any day for want of signature for their endorsement (or it negotiates with his banks some formula of entrance without endorsement).


9. To canalize the collections and payments in currencies in currency bank accounts, to make agile the collections and to reduce banking costs by currency change.

To study the convenience of which these accounts are located abroad. To pay to the suppliers, if it is possible, with personal check or transference from these accounts, with the consequent saving in commissions and valuations.


10. To review the collection systems and to eliminate less effective, or to penalize the client who chooses them.

To try to impose collection systems that are executed by own initiative, as for example through position by receipt in bank account. Not to yield the initiative to the client, being avoided to acquire by replacement by check or transference.


11. To review the conditions of sale, establishing an ABC of conditions that fits with the ABC of clients.

To communicate this policy to the clients and the commercial ones. To mark to a date limit for its complete application. To review the text of the orders and the contract-type and to adapt it to reinforce the conditions of invoicing and collection.


12. To review the invoicing process, making sure that one invoices daily, with the date of expedition of merchandise or accomplishment of the service, and that the term of granted credit well is calculated and the concrete date of payment and the details of the collection way they suitably consist in the form of the invoice.

Generally, to audit the effectiveness of the processes of sale, invoicing and collection from the financial perspective.


13. To eliminate the portfolio of effects the collection in paper.

To send receipts digitally to the bank, by transmission through e-mail, or better of the system of electronic bank. When doing it, negotiating a reduction of the banking commissions of cession and collection of effects.


14. To review the treatment of the unphelp debts.

To make agile the immediate claims from a centralized department of management of risks of clients, and to penalize to the weak people being applied to them high surcharges by non-payment (for example a 6%: 4% by commission of non-payment and 2% by delay).


15. To centralize all the payments that are possible and to concentrate them in some specific days.

To avoid the decentralization of payments in delegations or factories, and the dispersion of payments between every day of the month.


Banking policy

16. To distribute the financing needs enters 3 banks not less than nor more than 6.

Any number outside that margin lies down to make worse the obtained conditions and the service.


17. To establish an annual plan of business with each bank, in writing, indicating the volumes of operations and the agreed conditions.

To try to realise an analysis of the net yield that will obtain the bank (balance bank-company). To communicate these conditions to the employees who are to control their fulfillment. To create a verification seal to be printed in each banking document once verified the correct application of the agreed conditions.



18. To compare the cost of financing via discount with the financing via credit policy.

To make sure that the best option at every moment is used. The financing via credit account has important advantages.


19. To fund itself in banking lines to largish term with option multidescries (that includes the Euro), with the aim of obtaining a cost of financing optimized, with a minimum differential on the Euribor.


Control of the financial risk

20. To define a policy of management of the change and interest risks.

To implant systems of measurement of these risks and of establishing measures of cover, as much operative (to short) as strategic (to length). To use the cover by means of derivatives (options, futures, swaps…).

I hope that this list of measures or recommendations serves the reader to him to reflect on the state of the financial management in its company, and to be decided to make a control of the same and, where appropriate, establish a plan of implantation of those improvable or not covered aspects. The sooner, better.