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Working Capital: Key To Cash Flow Essay

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Mining the cash in operations:
Working capital: key to cash flow
that treasury rarely manages
Fragmented control
wastes cash, drives
up costs.
by Richard H. Gamble
I n one of the rosy scenarios circulating
in 1988, cash managers
would prosper by reinventing themselves
as treasury managers, who
would then reinvent themselves as
working capital managers. That was
to be their job description
by 1996, if not sooner.
By 1988, short-term
interest rates were back
in single digits. The exciting
days of harvesting
mountains of valuable
cash by setting up lockboxes
and controlled
disbursement systems
were fading. Being a
skilled cash management
specialist no longer
looked like a promising
career foundation.
Meanwhile, new LBOs
were turning to aggressive
working capital
management as they
fought for survival. It
seemed like the leading
edge of corporate financial
management and the
logical extension of cash
So why didn't it happen?
And what opportunities
do exist today for
treasmy managers to expand
into working capital management?
Tale from the trenches
Much of what happened and didn't
happen in corporate financial management
in the first half of the '90s
can be seen in the story of Mark
Berthold, who, for 18 months lived
the dream of being a former cash
manager who suddenly was empowered
to manage all the working capital
of his corporation. Only on some
days, the dream seemed more like a
He already had seen one employer
buried by the time he went to work
for QuesTech Inc., a McLean, VAbased
government contractor, in
1987. MBI Business Centers of
Rockville, MD, had gone up fast (from
$6 million to $100 million in sales in
a little over four years) and down
even faster. The computer reseller
with an aggressive sales culture fell
victim to market volatility, increased
competition and working capital mismanagement.
In a struggle to expand sales in the
face of falling prices and...

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