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Press release from Business Wire

Cash is Still King: Finance Executives at Mid-Size Companies Focus on Maintaining Fiscal Discipline

<p class='bwalignc'> <i>40% of Executives Say Lack of Bargaining Power with Customers, Suppliers is Greatest Obstacle to Improving Working-Capital Management,</i> <i>According to New American Express/CFO Research Report</i> </p>

Tuesday, March 13, 2012

Cash is Still King: Finance Executives at Mid-Size Companies Focus on Maintaining Fiscal Discipline11:01 EDT Tuesday, March 13, 2012 NEW YORK (Business Wire) -- Four years after the economic downturn, finance executives at mid-market companies are still focused on maintaining financial discipline and ensuring they have sufficient cash on hand. Executives acknowledge, however, that maintaining that level of discipline will be difficult as growth picks up, and cash is required for urgent spending and investment needs. These are among the findings from a new American Express/CFO Research report on mid-size companies, “Cash and Working-Capital Discipline: CFOs at midsize firms face their top financial challenges,” that is being released at this week's 19th annual CFO Leadership Summit. The report surveyed 323 senior finance executives at mid-size companies in the United States. “Balancing working capital performance with competing spending needs and growth opportunities is a key challenge companies of all sizes face today,” said Darryl Brown, President, Americas, Global Corporate Payments, American Express. “Mid-size companies have additional challenges, as they frequently negotiate for better payment terms with companies larger than they are, putting them at an obvious disadvantage. These companies need to be even smarter and more disciplined when it comes to cash flow management, and find new ways to maximize their working capital.” Strategies for Surviving Recession Create Foundation for Growth The vast majority (85%) of finance executives at mid-size companies are more financially disciplined in the aftermath of the recent downturn. While over one-third of all respondents (34%) say that maintaining financial discipline will become easier in the coming year, more respondents (41%) say they expect it will become more difficult as financial and personnel resources are allocated to meet new growth prospects. At the same time, finance executives recognize the value of maintaining fiscal discipline. Sixty-nine percent of respondents say that financial discipline will contribute to their competitive advantage over the next year – in contrast with 18% that cited this would limit their company's competitive advantage. Challenges Threaten Working Capital Improvement According to the survey, mid-market companies have stronger working-capital positions today than they had when the recession took hold. Two-thirds of respondents reported that their companies' days-working-capital (DWC) position today is better than it was three years ago. However, challenges to improving working capital performance remain, partly as a result of mid-market firms deriving a large volume of business (57%) from companies that are bigger than they are. This imbalance affects their ability to negotiate better deals and payment terms. Lack of bargaining power with customers and/or suppliers was the biggest obstacle respondents said their company faced when trying to improve cash and working-capital management; 40% of respondents said it was their top obstacle, beating 11 other obstacles, including internal pressure to accept less favorable terms to close sales (34%) and lack of a shared organizational mandate to improve cash & working capital management (32%). In addition, 47% of finance executives agree that larger companies have used their bargaining power to force them to accept slower payments. Forty-four percent of respondents acknowledge that even when they hold a negotiating advantage, they have trouble requiring suppliers and vendors to accept changes in payment terms. “The American Express network and billing cycle, along with our direct relationships with suppliers, helps level the playing field for mid-market companies,” continued Brown. “With these advantages and our expert guidance, we help improve payment terms and gain additional negotiating leverage – benefits mid-market companies can't always get on their own.” For the full American Express/CFO Research report, click here or visit americanexpress.com. About the Survey CFO Research Services surveyed 323 senior finance executives at mid-size companies across a wide range of industries in the United States. Company revenues ranged from $10 million to $500 million. The research program, conducted through an online survey of senior financial executives, was completed in January 2012. About CFO Research Services CFO Research Services is the sponsored research group of CFO Publishing LLC, which produces CFO magazine, CFO.com, and CFO Conferences. For more than 25 years, CFO Publishing has been a trusted source of insight into the issues that matter most to finance professionals. CFO Publishing LLC, a portfolio company of Seguin Partners, is the leading business-to-business media brand focused on the information needs of senior finance executives. CFO Publishing's award-winning editorial content and loyal, influential audience make it a valued resource for its readers as well as an effective marketing partner for a wide range of blue-chip companies. CFO Publishing has long-standing relationships with more than a half-million finance executives. About American Express Global Corporate Payments Through its Global Corporate Payments group, American Express provides the Corporate Card, Corporate Purchasing Solutions, and other expense management services to mid-sized companies and large corporations worldwide. American Express helps mid-size companies improve their cash flow and achieve their expense management goals in a number of ways, including: More Working Capital – The American Express billing cycle allows companies to pay suppliers more quickly while keeping their cash longer, optimizing working capital and improving supplier relationships. Greater Savings – The American Express suite of corporate payment solutions help companies consolidate and track spending across businesses and geographies to arm companies with additional negotiating leverage with suppliers, which ultimately drives savings to the bottom line. Expert Advice – American Express provides world-class relationship support through one of the largest dedicated client teams in the industry. The company offers customized analysis of client spending patterns and behaviors and expert advice on how to be more strategic about spending. In the U.S., American Express is a leading issuer of commercial cards, serving more than 70% of the Fortune 500, as well as tens of thousands of mid-sized companies. American Express issues local-currency commercial cards in more than 40 countries, and International Dollar Corporate Cards in an additional 100+ countries. For more information, visit www.americanexpress.com/corporate. Sloane & CompanyNevin Reilly, 212-446-1893nreilly@sloanepr.comorAmerican ExpressCorey Karsch, 212-640-0671corey.r.karsch@aexp.com