☞ Optimise your working capital and better manage your cash flow, advice from Benjamin Madjar

After 15 years with some of the world's leading consulting firms, Benjamin Madjar joined Deutsche Bank in 2015 where he now holds the position of EMEA Head Cash Management Structuring. His dual expertise as a banker and advisor makes him a privileged contact to answer questions such as: how to optimise working capital requirements? and how to manage cash? He shared with CashLab his views on the current market and gave us some recipes to make the work of CFOs and Treasurers easier.

 

What is your role at Deutsche Bank? And how did you come to be involved?

"In 2014, within the GTB (Global Transaction Banking) branch, the Bank has set up a team of former Treasurers and Consultants in order to complete the system offered to its main clients. Thus, in addition to the Coverage and Products teams (Trade Finance, Cash Management and Trade Export), this brings a different perspective.

In particular on the company's challenges in terms of WCR management, Supply Chain and underlying financing. De facto, this enables us to provide an even finer knowledge of the client and its needs. And thus offer solutions that are perfectly adapted to the client's objectives. »

 

After 15 years in consulting, what are the main lessons learned from this past year in the banking sector?

"The main lesson (or confirmation) is that it is in teams that one is more effective and stronger. Whether in the banking or consulting sector, for that matter. It was true in my former life, it is still true today. In addition, it is increasingly obvious that we learn from others, from our experiences in various environments or sectors. I've been learning every day for the past year through contact with others. »

 

What do you currently see on the market? What are the main themes you encounter?

"Several themes emerge depending on the size of the company, its access to the financing market, its geographical positioning, its level of maturity in terms of cash management and cash culture.

Large groups have very (very) attractive financing conditions. On the other hand, they find it difficult to invest their excess cash, forcing them to think about:

 

  1. Rationalisation of the number of bank accounts and underlying charges,
  2. And the centralisation of cash management (i.e. Shared service centres, payment factories, POBO /COBO structures, Virtual accounts),
  3. Implementation/replacement of a cash management tool (Treasury Management System),

Finally, the implementation of "new technologies/solutions proposed by fintechs", whether on cash management or supply chain management (ie. Slim pay). »

 

Alternative financing

"Many are those who wish to set up alternative financing, in particular Supply Chain Financing or Inventory Financing. And with a variety of objectives:

 

  • Optimising your WCR or ROCE. The arrangements must be deconsolidated to take into account current or future accounting constraints (i.e. IFRS 16 with impacts on the treatment of leasing amounting to ~ 2.8Tr$). Without forgetting to consider the impact in the calculation of the rating by the rating agencies,
  • Support their suppliers by offering them the possibility of being paid in advance with an advantageous financing rate.

At the same time, it can be seen that SMEs/Mid-caps have different needs than large groups, with differences depending on their activity, whether they are listed or unlisted or whether they are a family group. Among the main topics are:

 

  1. Access to financial solution,
  2. La Security against the risk of fraud,
  3. The implementation of efficient reporting shared by all operational staff.

Essential for good growth. »

 

Have consulting firms already taken up these issues?

Of course, as evidenced by numerous recently published studies (i.e. EY, PwC, Grant Thornton and REL) that show strong trends on these subjects:

 

  • SMEs have significantly higher working capital requirements than large groups, and the gap is widening...
  • Better management of working capital enables a better transformation of profit into cash,
  • The best WCR managers have 76% more cash than the worst managers,
  • In last year's Cash Management review, Grant Thornton identified cash forecasting as one of the key tools for business management, yet 13% of the companies surveyed by their teams still do not use it. Here again, there are differences in behaviour depending on the size of the company.
    While everyone agrees that it is a means of anticipating financing needs and a tool for managing working capital requirements, companies with a turnover in excess of €251 million are almost the only ones to use it to optimise their investments and consider long-term acquisitions.

Finally, the common issue for all companies: establishing cash flow forecasts at Short, Medium or Long Term, while being able to analyse actual vs. forecast variances more quickly and, above all, more easily. »

 

Beyond the technical aspects involving technological solutions, what are the key principles you find concerning in particular cash management and forecasting?

"A principle to which I am also attached in my personal life: old recipes always work... Sometimes you have to go back to the basics to find the right solution.

3 fundamental principles:

 

  1. Governance: Management must instil the strategy, the direction to be followed and align the interests of each party to achieve a common goal,
  2. Communication Clear, precise and shared. For example, Treasury, Controlling and Accounting must work together and make Cash a common and shared subject,
  3. The follow-up: Objectives must be set, steering tools must be put in place and monitoring must be carried out to measure the level of performance (WCR or cost reduction) or whether the previously determined objectives have been achieved.

It is necessary to find a balance between the basics and our appetite for innovation: many good ideas and solutions have emerged thanks to the development of technologies and those to come (ie. blockchain). Moreover, FinTech is often pitted against the banks (ie. because of the new alternative payment systems they offer). Wrongly I think: their activities, ideas and technologies are complementary to the banks.

Finally, it should always be remembered that cash is always the trigger of the difficulties: whatever the context, cash culture and cash flow management is essential. »

 

What actions/solutions or recipes would you recommend to the CFO and Treasurer?

"There are many, and the following list is not meant to be exhaustive. My dual experience between consulting and banking allows me to have a vision with different prisms. For my part, it is important to:

 

  • To make a detailed assessment of funding needs,
  • To have a clear vision of the company's maturity on the subjects of cash & cash-flow management,
  • Set up a governance system adapted to cash management,
  • Carry out a transverse reflection on the supply chain and implement the appropriate technologies (but not at any price),
  • Putting the necessary means to train your teams : knowledge (and know-how) is essential,
  • Have a complete vision, and not a piecemeal one, as is too often the case with cash management and existing solutions,
  • Encourage interaction with peers.

But also, do not hesitate to question yourself year after year...".

 

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