Dan Ginsberg Advises CFOs on Working Capital & Rising Interest Rates
Daniel Ginsberg, managing director, private equity at SGS Maine Pointe, offered CFOs key advice about working capital in a recent contribution to Global Finance magazine’s investigation of “New Cash Challenges.” The article pointed to rising interest rates as the source of increased pressure on CFOs to manage working capital. According to Ginsberg, inventory, receivables, and payables are the areas where CFOs should concentrate their attention.
One tactic available to companies is to quickly move excess inventory out of warehouses and distribution centers, even at a discount, to prevent tying up cash in obsolete, higher-cost inventory. Companies can unlock money in receivables by getting a clearer picture of the causes of disputes and automating the resolution process. Ginsberg explains that “more than three-quarters of disputes are not technically disputes at all, but rather questions for clarification that can be resolved in a phone interaction or self-service web portal.”
In the case of payables, he states, “Most companies are in effect being financed by their suppliers; because after they place a significant order, they do not pay the supplier until the merchandise is delivered…. The longer you can hold on to your cash and use it for other purposes, the better.” With prices declining, many companies are also seeking to renegotiate contracts. But, Ginsberg adds, “it’s hard to get a better price when you’re also asking for an extension of the payment terms, and therein lies your challenge in balancing your liquidity with your costs.”
By examining the three prongs of inventory, receivables, and payables, SGS Maine Pointe has not only helped companies free up working capital but also optimize their network, customer service, and sourcing. While companies may feel they have less money to spend on themselves, Ginsberg concludes, his recommended three-pronged approach generates money for both everyday and future needs.