San Diego Business Journal

Q&A Accounting Roundtable

Accounting Roundtable Supplement: Advertorial By Patti Anderson Friday, January 20, 2012

Have you seen a change in the way your clients monitor cash flow and what are some examples you can share?

Chris Allen, Deloitte & Touche LLP

Over the past few years when credit has been very tight, monitoring and forecasting of cash flows has been an enhanced focus and investors have paid more attention to cash burn rates. In response to this, we’ve helped clients improve the sophistication of their cash flow modeling techniques. We’ve also assisted financially – distressed companies with tax and other planning to address debt forgiveness issues and effective use of losses to achieve tax refunds or reduce future tax liabilities, as well as restructuring to streamline operations and improve cash flow.

Don Williams, Grant Thornton LLP

Monitoring and managing cash flow is a critical task of any company, especially a growing one. Delaying payment to vendors is one way we have seen companies improve the cash position in the recent terms; however, such practice could have detrimental results in the long term. Negotiating new payment terms with vendors has proven to be a more effective method as well as providing customers improved incentives to pay within a shorter period of time. Those companies with debt financing have considered refinancing to improve the payment structures and timing of their principal and interest. Finally, a significant number of companies have managed their capital expenditures and discretionary spending to the extent that such deferrals of cost would not impact their operations. As many companies have learned in this tough economy, cash is king and managing your business’s cash flow can significantly impact growth and sustainability. Ryan Selhorn, Senior Manager, contributed to this response.

Elsa Romero, AKT LLP

Yes, our clients have transitioned into having a more direct hand in managing their cash flows as well as increasing the frequency of updating their projected cash flows for both the short and long term. Our goal is to not only be available to our clients in responding to their needs when they have questions that could impact their cash flows, but to proactively bring ideas to them.

Harvey J. Schroeder, White Nelson Diehl Evans LLP

Nearly all of our clients have been affected by the downturn of the economy in some fashion and trying to improve cash flow has been a prime directive. To mitigate the effects of decreasing cash flows, we have seen clients revisit their contractual obligations from restructuring capital and operating leases to delaying construction and other expansion projects. We have unfortunately seen clients forced to reduce staffing levels to accommodate their lower volume of business, while at the same time using creative uses of part-time and contract labor to continue to get the work completed. Many clients have a large amount of capital tied up in accounts receivable and inventory so we have worked with them to plan for reduced inventory levels and improve their accounts receivable turnover ratio based on the lower levels of business activity. The result is the client has budgeted for their cash flows and can plan for the cash flow highs and lows, instead of being surprised when there is a shortage of cash and wondering how it happened.

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