☞ 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?

“En 2014, au sein de la branche GTB (Global Transaction Banking), la Banque a constitué une équipe composée d’anciens Trésoriers et Consultants afin de venir compléter le dispositif offert à ses principaux clients. Ainsi, en plus des équipes de Coverage et Produits (Trade Finance, Cash Management et Trade Export), cela permet d’apporter un regard différent.

Notamment sur les enjeux de l’entreprise en matière de gestion du BFR, de Supply Chain et des financements sous-jacents. De facto, cela nous permet d’apporter une connaissance encore plus fine du client et de ses besoins. Et ainsi lui proposer des solutions parfaitement adaptées à ses objectifs.”

 

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

“Le principal enseignement (ou confirmation) est que c’est en équipe que l’on est plus efficace et plus fort. Que cela soit d’ailleurs, dans le secteur bancaire ou dans celui du conseil. C’était vrai dans mon ancienne vie, ça l’est toujours aujourd’hui. En complément, il est de plus en plus évident que l’on se nourrit des autres, de nos expériences dans divers environnements ou secteurs. J’apprends tous les jours depuis 1 an au contact des autres.”

 

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

“Plusieurs thèmes ressortent en fonction de la taille de l’entreprise, de son accès au marché du financement, de son positionnement géographique, de son niveau de maturité en matière de gestion de trésorerie et de culture cash.

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),

Enfin, la mise en place de « nouvelles technologies / solutions proposées par des fintechs », que ce soit sur la gestion de trésorerie ou de la supply chain (ie. Slim pay).”

 

Alternative financing

“Nombreux sont ceux qui souhaitent mettre en place des Financements alternatifs, notamment Supply Chain Financing ou Inventory Financing. Et avec des objectifs variés :

 

  • 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. The Security against the risk of fraud,
  3. The implementation of efficient reporting shared by all operational staff.

Indispensables pour une bonne croissance.”

 

Have consulting firms already taken up these issues?

“Bien entendu, comme en témoignent de nombreuses études publiées dernièrement (ie. EY, PwC, Grant Thornton et REL) qui font ressortir des 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, en étant capable d’analyser les écarts réel vs. prévisionnel plus rapidement et surtout plus facilement.”

 

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

“Un principe auquel je suis attaché aussi dans ma vie personnelle : les vieilles recettes fonctionnent toujours… Il faut parfois revenir aux basiques pour trouver la bonne 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.

Enfin, il faut toujours se souvenir que la trésorerie est la principale cause de défaillance (« Cash is always the trigger of the difficulties ») : quel que soit le contexte, la culture cash et le pilotage par les cash-flow est essentiel.”

 

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

“Il y en a plusieurs et la liste qui suit ne se veut pas exhaustive. Ma double expérience entre le conseil et la banque me permet d’avoir une vision aux prismes différents. Pour ma part, il est important de :

 

  • To make a detailed assessment of funding needs,
  • To have a clear vision de la maturité de l’entreprise sur les sujets de cash & cash-flow management,
  • Set up a governance system adapted to cash management,
  • Mener une réflexion transverse sur la supply chain et mettre en place les technologies adaptées (mais pas à n’importe quel prix),
  • 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.

Mais aussi, ne pas hésiter à se remettre en question année après année…”

 

Closely monitor your cash flow in a clear and optimised manner with out Cashlab tool.