Gestion de la trésorerie

Étude de cas qualitative de deux petits cabinets d’experts-conseils

Thèse de licence
Gestion industrielle et financière

Université de Göteborg
École de commerce, d’économie et de droit
Printemps 2012

Superviseur : Gert Sandahl

Auteurs Date de naissance

Christo er Bengtsson 890210-5553
Therese Persson 890920-5067
Anton Stig o 860619-4937
Résumé
Titre : Gestion de trésorerie - Étude de cas qualitative de deux petites
entreprises-
entreprises participantes
Cours :
Thèse de licence en administration des affaires - Université de Gothen-
burg, École de commerce, d’économie et de droit
Auteurs :
Anton Stig o, Christro er Bengtsson et Therese Persson
Superviseur :
Gert Sandahl
Mots clés :
Gestion de la trésorerie, liquidité, prévision des liquidités, entrées de
trésorerie, trésorerie
sorties, PME, conseil

Contexte et discussion du problème : La gestion de la trésorerie est la planification et

la gestion des flux de trésorerie. Le concept comprend la prévision des flux de
trésorerie futurs, l’investissement de liquidités excédentaires ainsi que le
financement des besoins de liquidité et la gestion des flux de trésorerie. L’objectif est
de recevoir les entrées le plus tôt possible et de retarder les sorties le plus
longtemps possible sans entraîner de coûts supplémentaires. La connaissance de la
gestion de la trésorerie a augmenté et varie d’une entreprise à l’autre, mais il y a
encore place à l’amélioration, surtout parmi les petites entreprises. Des études
montrent que les petites entreprises manquent de connaissances et de
connaissances en matière de gestion de trésorerie.

Objet : La présente thèse vise à examiner la façon dont les petites sociétés
d’experts-conseils appliquent les pratiques de gestion de la trésorerie dans leurs
activités et à tenter de déterminer les raisons pour lesquelles elles agissent comme
elles le font. Pour mieux comprendre comment les entreprises utilisent la gestion de
trésorerie, une étude sur deux petites sociétés de conseil sera réalisée. De plus, le
but est de voir s’il y a des possibilités d’améliorer les pratiques conformément à la
théorie de la gestion de trésorerie.

Méthodologie : Étude de cas qualitative de deux petits cabinets d’experts-conseils

fondée sur des entrevues semi-structurées. Les répondants étaient des personnes
ayant des responsabilités dans la fonction de gestion de la trésorerie des
entreprises.

Résultats : Les pratiques de gestion de la trésorerie sont appliquées dans une certaine
mesure dans les deux cabinets d’experts-conseils. Lorsqu’elles fixent le niveau de
liquidité, les entreprises procèdent à une approximation de ce qu’elles estiment être un
niveau approprié en fonction d’un mois de sorties de trésorerie. La Société A place les
liquidités excédentaires dans un compte qui pourrait générer un rendement plus élevé,
tandis que la Société B conserve tous ses liquidités dans son compte d’affaires. Les
prévisions de liquidité sont utilisées dans une certaine mesure, mais l’avantage qu’elles
apportent pourrait ne pas en valoir la peine. Le manque de temps et de ressources et le
fait que la gestion de la trésorerie ne soit pas une question prioritaire signifient que les
flux de trésorerie ne sont pas gérés aussi efficacement que possible dans certains
domaines. Mesure dans laquelle les pratiques de gestion de la trésorerie sont appliquées
entre les sociétés.
Contenu
1 Introduction 1
1,1 Contexte [...] [...] [...] 1
1,2 Discussion sur les problèmes [...] [...] 2
1,3 Le but [...] [...] [...] [...] 4
1,4 Les limites [...] [...] [...] 4

2 Méthodologie 5
2,1 Choix de la méthode [...] [...] 5
2,2 Données primaires [...] [...] [...] 5
2.2.1 Documentation et articles [...] [...] 5
2.2.2 Sélection des entreprises [...] [...] 6
2,2,3 Sélection des répondants [...] [...] 7
2.2.4 Les entrevues [...] [...] [...] 8
2,2,5 Exécution des entrevues [...] [...] 8
2,3 La validité et la fiabilité [...] [...] 9

3 Cadre théorique 9
3,1 Introduction à la gestion de la trésorerie [...] 9
3,2 Comment gérer la liquidité et les flux de trésorerie [...] 10
3.2.1 La gestion de la liquidité [...] [...] 10
3.2.2 Flux de trésorerie entrants [...] [...] 13
3,2,3 [ ...] les flux de trésorerie sortants [...] [...] 16
3,3 Pratiques de gestion de la trésorerie des petites entreprises [...] 16
3.3.1 Les prévisions [...] [...] [...] 16
3,3,2 La détention de liquidités [...] [...] 17
3,3,3 La flèche du crédit [...] [...] [...] 17
3,3,4 Conclusions importantes tirées d’études antérieures [...] 18
3,4 Résumé [...] [...] [...] 18

4 Constatations empiriques 19
4,1 Introduction aux entreprises [...] [...] 19
4.1.1 Société A et leur point de vue sur la gestion de la trésorerie [...] 19
4.1.2 Société B et leur point de vue sur la gestion de la trésorerie [...] 19
4,2 Gestion des liquidités, Société A [...] [...] 19
4.2.1 Combien d’argent la société A retient-elle et pourquoi? [...] 19
4.2.2 Le financement des déficits et le placement des excédents [...] 20
4.2.3 Prévision de la liquidité [...] [...] 20
4,3 Gestion des liquidités, Société B [...] [...] 21
 4.3.1 Combien d’argent la société B détient-elle et pourquoi? [...] 21
4.3.2 Le financement des déficits et le placement des excédents [...] 21
4.3.3 Les prévisions de liquidité [...] [...] [...] 22
4,4 Gestion des flux de trésorerie entrants, Société A [...] 22
4.4.1 De la proposition à l’ordre et à la livraison [...] 22
4.4.2 La facture [...] [...] [...] 23
4.4.3 [...] Dunning [...] [...] 24
4,5 Gestion des flux de trésorerie entrants, Société B [...] 24
4.5.1 De la proposition à l’ordre et à la livraison [...] 24
4.5.2 La facture [...] [...] [...] 25
4,5,3 [...] Dunning [...] [...] 26
4,6 Résumé des constatations empiriques [...] 26

5 Analyse 27
5,1 [...] la liquidité [...] [...] [...] [...] 27
5.1.1 Pourquoi les entreprises détiennent-elles des liquidités? [...] 27
5.1.2 Combien de liquidités les entreprises détiennent-elles? [...] 28
5,2 Prévision de la liquidité [...] [...] 29
Les organisations établissent-elles des prévisions de liquidité?
5.2.1 [...] 29
5.2.2 Le calendrier des flux de trésorerie [...] 30
5.2.3 Prévision du financement à court terme [...] 30
5.2.4 Financement à long terme [...] [...] 31
5.2.5 Quelle est l’importance des prévisions? [...] 31
5,3 Flux de trésorerie entrants [...] [...] 32
5.3.1 De la proposition à l’ordre et à la livraison [...] 32
5.3.2 La facture [...] [...] [...] 33
5.3.3 [...] Dunning [...] [...] 35

6 Conclusion 36
6,1 Les résultats [...] [...] [...] 36
6,2 Les réflexions [...] [...] [...] 39
6,3 Suggestions de recherches plus poussées [...] [...] 40

Références 42

Annexe A - Modèle d’entrevue 44

1 Introduction

1,1 Contexte

Dans des conditions de marché parfaites, les entreprises sont en mesure

d’emprunter de l’argent à un taux équitable à tout moment et ne bénéficient pas de la
détention de liquidités supplémentaires en tant que bu er. Il y aurait aussi une
garantie que l’entreprise peut investir de l’argent à un taux de rendement équitable.
En réalité, ce n’est pas le cas. Les marchés ne sont pas parfaits et la détention
d’actifs liquides a un coût. La décision de la quantité de liquidités à détenir entre les
entreprises en fonction d’un certain nombre de facteurs tels que l’accès aux marchés
des capitaux, le risque de l’entreprise et la croissance potentielle de l’entreprise
(Berk et DeMarzo, 2011). Ces facteurs, entre autres, dépendent de l’industrie et de
la taille de l’entreprise. Le fait est que la détention de trop d’argent a un coût, alors
que la détention de trop peu d’argent comporte des risques.
La façon dont les entreprises gèrent leurs flux de trésorerie est un facteur financier
important pour accroître l’efficacité des entreprises et maximiser la richesse des actionnaires.
L’expression « l’argent est roi » est largement utilisée pour exprimer l’importance des flux de
trésorerie dans la santé financière globale des entreprises. L’argent est le moteur de toutes
les entreprises et il est nécessaire si les entreprises veulent être en mesure de gérer avec
succès leurs obligations financières (Pike, Neal et Linsley, 2012). Cela est particulièrement
important en période de récession lorsque les prêts sont limités. Sans liquidités, les
entreprises pourraient ne pas être en mesure de couvrir les décaissements courants, ce qui,
à son tour, entraîne un plus grand risque de défaut. D’autre part, la détention de trop d’argent
peut constituer une utilisation insuffisante des ressources. Par conséquent, au cœur même
d’une entreprise prospère se trouve la capacité de gérer la liquidité et les flux de trésorerie de
manière efficient.
Bien que plusieurs définitions existent, la gestion de la trésorerie concerne
fondamentalement la planification et la gestion des flux de trésorerie, avec pour
objectif ultime d’accroître la rentabilité des entreprises. Cooley et Pullen (1979)
décrivent la gestion de trésorerie à court terme comme un domaine composé de trois
composantes principales. La première concerne la prévision des flux de trésorerie
futurs. C’est aussi ce qu’on appelle les prévisions de trésorerie et cela a pour but de
fournir aux décideurs des renseignements sur le calendrier des flux de trésorerie. Il
est essentiel de connaître le montant de liquidités requis pour chaque période pour
être en mesure de respecter les obligations financières et de planifier des
investissements futurs. Le deuxième volet traite de la question de savoir comment
investir les liquidités excédentaires le plus efficacement possible. Il y a toujours un
coût d’opportunité à détenir de l’argent et le simple fait de laisser de l’argent dans
des comptes bancaires à faible rendement n’est pas nécessairement la meilleure
option. L’autre aspect est de savoir comment la plupart des efficiently lever des
capitaux pour répondre aux besoins supplémentaires de trésorerie. Le dernier
élément de la gestion de la trésorerie concerne le contrôle des entrées et sorties de
trésorerie. Par exemple, en contrôlant les routines administratives, les entreprises
peuvent rationaliser les processus, ce qui les rend capables de régler leurs comptes
avec les clients et les fournisseurs de manière plus efficiently, et d’améliorer ainsi la
liquidité globale de l’entreprise.

1
 Selon l’étendue de la définition de la gestion de trésorerie, d’autres activités telles
que les relations bancaires et les systèmes de comptes peuvent également être incluses
dans le concept. D’un point de vue mondial, des activités telles que la gestion des
devises, le cash pooling et la gestion des comptes bancaires internationaux sont
également importantes. Le commerce international présente également d’autres défis en
matière de gestion de trésorerie, par exemple en termes de flottement de crédit étendu
et de pratiques commerciales étrangères (p. ex., Dolfe et Koritz, 1999). Cette étude
applique la définition de la gestion de la trésorerie proposée par Cooley et Pullen (1979)
et ne porte que sur les questions de gestion de la trésorerie d’un point de vue national.

1,2 Discussion sur le problème

Les entreprises connaissent différents problèmes de liquidité en fonction de la nature de

leurs activités et de l’amélioration de leurs routines de gestion de trésorerie. Alors que
certaines entreprises sont très liquides, d’autres entreprises peuvent se soustraire à un
manque de fonds disponibles.
Le niveau de sensibilisation aux avantages potentiels de la gestion de la
trésorerie varie d’une entreprise à l’autre (Karlsson, 1996). Les grandes entreprises
ont souvent des services entiers qui s’occupent de la planification financière et de la
gestion de la trésorerie, alors que cette tâche peut être confiée à une seule personne
dans les petites et moyennes entreprises. Selon Larsson et Hammarlund (2005), la
notoriété de la gestion de trésorerie parmi les entreprises a augmenté, mais il y a
encore place à l’amélioration, en particulier parmi les petites et moyennes
entreprises. Des recherches menées par Anvari et Gopal (1983) ont révélé que les
gestionnaires de petites entreprises canadiennes comprennent peu la gestion de la
trésorerie. Dans leur étude, les sociétés ont également conservé des soldes de
trésorerie relativement importants, ce qui représente de bonnes possibilités
d’utilisation plus efficace des excédents de trésorerie. Une autre étude portant sur
122 négociants américains en pétrole a révélé une utilisation plutôt sophistiquée des
procédures de gestion de trésorerie, mais il y avait aussi place à des améliorations
considérables par des mesures relativement simples (Cooley et Pullen, 1979).
Ces résultats ne sont pas surprenants, car les petites entreprises manquent
toutes deux d’expérience et de ressources. Cooley et Pullen (1979) affirment que la
gestion de trésorerie offre aux petites entreprises de bonnes possibilités d’améliorer
l’efficacité et la rentabilité des entreprises. Selon Bennet (1996), il n’est pas inhabituel
d’obtenir une réduction du capital immobilisé correspondant à 2 à 3 pour cent du chiffre
d’affaires de l’entreprise en raison de l’amélioration des pratiques de gestion de la
trésorerie. Hedman (1991) est un peu plus prudent dans son estimation, en fixant ce
chiffre à un pour cent du chiffre d’affaires de l’entreprise. Néanmoins, il y a certainement
des gains potentiels à accorder une attention accrue à la gestion de trésorerie.
Il existe plusieurs raisons pour lesquelles les entreprises peuvent subir des
difficulties de liquidité. La dimension temporelle des flux de trésorerie en est une et
présente un intérêt particulier pour la gestion de la trésorerie (Larsson, 2005). Les
entreprises en expansion et les entreprises nouvellement établies ont souvent de la
difficulté à obtenir de faibles liquidités en raison du délai qui s’écoule entre les nouveaux
investissements et les entrées de capitaux.

2
des liquidités qu’ils génèrent (Larsson, 2005). Par conséquent, la gestion de la
trésorerie est particulièrement importante pour les nouvelles entreprises et les petites
entreprises. Le décalage temporel entre les flux de trésorerie entrants et sortants
comporte le risque que les entreprises soient forcées de suspendre leurs paiements,
ce qui peut aboutir à un défaut de paiement si un financement à court terme ne peut
être obtenu. Un apport de liquidités retardé entraîne également un coût d’opportunité
sous la forme de gains d’intérêts perdus. Une grande partie du capital est souvent
immobilisée dans des processus plus longs que nécessaire en raison de routines et
de processus inefficaces (Larsson, 2005). L’examen et l’amélioration de ces routines
permettraient aux entreprises d’accélérer leurs flux de trésorerie, d’accroître
l’efficience et, par conséquent, de réduire leurs besoins de liquidités.
Pour les entreprises établies et les entreprises poursuivant des stratégies
d’expansion plus lentes, la situation de liquidité peut sembler différente. L’afflux de
capitaux peut alors être supérieur à la sortie de liquidités, les favorisant avec des
capitaux excédentaires (Blomstrand et K allstr om, 1991). Cela soulève la question
de savoir comment utiliser le capital excédentaire le plus efficacement possible et
quel niveau de trésorerie l’entreprise dispose de manière appropriée.
Au cours des dernières décennies, le monde industrialisé a connu une
recrudescence dans le secteur des services. En fait, 80 pour cent de toutes les
entreprises nouvellement établies en Suède sont dans le secteur des services et il est
devenu commun chez les fabricants d’acheter des services qui ont été précédemment
exécutés en interne (Spak et Wahlstr om, 2007).
Les sociétés de conseil sont un groupe de sociétés qui fournissent des
services. Ces entreprises sont différentes pour diverses raisons. Premièrement, ils
manquent souvent d’immobilisations, mais sont riches en actifs courants et en capital
humain. En outre, les petites entreprises en général sont souvent tributaires de la
dette comme source de liquidités (Khan et Rocha, 1982), ce qui les oblige
généralement à fournir une certaine forme de garantie des actifs. Deuxièmement, les
revenus dépendent fortement du rendement des consultants et, pour rester liquides,
les entreprises doivent avoir des routines de facturation et de déclaration de temps
efficaces. Cependant, selon Larsson et Hammarlund (2005), l’expérience montre que
la routine de facturation des entreprises de services est souvent moins efficient que
pour l’industrie traditionnelle.
Au fil des ans, un certain nombre d’études de gestion de trésorerie ont été
réalisées sur des entreprises de différentes tailles et dans différentes industries (p. ex.,
Cooley et Pullen, 1979 et Anvari et Gopal, 1983). Cependant, malgré une recherche
documentaire approfondie, nous n’avons pu trouver aucune étude sur les petites
entreprises du secteur de la consultation. Compte tenu de la faible connaissance de la
gestion de la trésorerie dans les petites entreprises en général et de l’importance accrue
du secteur des services, la présente thèse porte sur la façon dont les gestionnaires
d’entreprise des petites entreprises de consultation appliquent les pratiques de gestion
de la trésorerie. L’accent sera mis sur l’identification des problèmes de liquidité auxquels
ces entreprises sont confrontées et sur l’examen du raisonnement sous-jacent à la façon
dont les gestionnaires d’entreprise gèrent les problèmes de liquidité et de gestion de la
trésorerie.
Il existe une abondante documentation expliquant ce qu’est la gestion de
trésorerie et comment elle peut aider les entreprises à améliorer leur rentabilité et
leur efficacité. Par exemple, Dolfe et

3
Koritz (1999) et Larsson et Hammarlund (2005) fournissent de nombreux conseils
sur le terrain. Néanmoins, les recherches de e. g. Cooley et Pullen (1983) montrent
qu’il existe des possibilités considérables d’amélioration parmi les petites
entreprises.
La question est de savoir si les gestionnaires de petits cabinets d’experts-
conseils agissent vraiment conformément à la théorie de la gestion de la trésorerie ou si
les décisions sont prises au hasard. Si tel est le cas, nous cherchons à déterminer les
raisons pour lesquelles il existe un écart entre les résultats précédents et notre étude.
Nous nous attendons à ce que cela soit lié à la façon dont les gestionnaires d’entreprise
des petites entreprises prennent leurs décisions. Dans ce contexte, il est important de
rappeler que chaque entreprise est unique et que les dirigeants ont donc une marge
d’action différente.
Le potentiel de prise en compte accrue des pratiques de gestion de trésorerie
est beaucoup plus intéressant pour les entrées que pour les sorties de trésorerie.
Les petits cabinets d’experts-conseils exercent leurs activités dans le secteur des
services et les décaissements sont relativement limités aux coûts stables et
récurrents tels que les loyers, les salaires et les impôts. En revanche, les entrées de
trésorerie sont le résultat de conditions contractuelles négociables, et une bonne
gestion des comptes débiteurs offre la possibilité de fortement affecter la liquidité
globale de l’entreprise. Par conséquent, on s’intéressera exclusivement à la façon
dont les entreprises de l’étude gèrent leurs entrées de fonds. La discussion
présentée ci-dessus mène aux questions suivantes :

• Comment les petits cabinets d’experts-conseils appliquent-ils les pratiques de gestion

de la trésorerie dans leur entreprise?

• Quel est le raisonnement sous-jacent pour expliquer pourquoi les gestionnaires

de petits cabinets d’experts-conseils appliquent la gestion de trésorerie comme
ils le font?

• Est-il possible d’améliorer les pratiques actuelles conformément à la théorie de

la gestion de trésorerie?

1,3 But

Sur la base de la discussion ci-dessus, le but de cette thèse est de répondre aux
questions susmentionnées. Le but de cette étude est d’examiner comment les
petites sociétés d’experts-conseils appliquent les pratiques de gestion de la
trésorerie dans leur entreprise et de déterminer pourquoi elles appliquent les
pratiques de gestion de la trésorerie comme elles le font. Pour recevoir des
informations détaillées sur la façon dont les entreprises utilisent la gestion de
trésorerie, une étude sur deux petites sociétés de conseil sera réalisée. De plus, le
but est de voir s’il y a place à l’amélioration des pratiques actuelles conformément à
la théorie de la gestion de trésorerie.
1,4 Limites

Il serait intéressant d’estimer les gains potentiels que les entreprises de cette étude
pourraient réaliser en améliorant les pratiques de gestion de la trésorerie. Toutefois,
aucune quantification de ces gains ne sera faite en raison des contraintes de temps et de
ressources. On cherche plutôt à savoir si les entreprises peuvent améliorer leurs routines
de gestion de trésorerie et, dans l’affirmative, comment.

4
2 Méthodologie

2,1 Sélection de la méthode

Il existe deux approches scientifiques fondamentales pour choisir la méthode de

recherche. Une étude peut être quantitative ou qualitative, mais elle se situe souvent entre
les deux (Patel et Tebelius, 1987), et la méthode de recherche doit être choisie en fonction
de la perspective théorique et du but de l’étude (Trost, 2005). La décision a été prise
d’adopter une approche qualitative, car l’objectif principal de cette étude est d’examiner
comment les petites sociétés d’experts-conseils appliquent les procédures de gestion de
trésorerie dans leur entreprise. Cette thèse tente d’expliquer le raisonnement sous-jacent
des chefs d’entreprise impliqués dans l’étude. L’approche qualitative facilite la collecte de
données plus détaillées et plus spécifiques nécessaires pour atteindre cet objectif (Patel et
Tebelius, 1987). Interviews are an e ective tool for gathering this kind of qualitative data
(Trost, 2005). Interviews also decrease the risk that the respondents misinterpret
questions. For these reasons, the collection of data will be made through qualitative
interviews.
To fulfil the purpose of this study the decision was also made to perform a
case study of a number of firms. A case study means examining a few study objects
in various aspects (Eriksson and Wiedersheim-Paul, 2006). The primary advantage
of this is that it makes it possible to study what happens under real circumstances
(Wall´en, 1993). Case studies are also especially useful when seeking the answer to
questions of how and why (Blumburg, Cooper and Schindler, 2005). In short, a case
study would make it possible to go in-depth in order to investigate the cash
management issues of concern and to fulfil the purpose of this study.
Knowledge creation can be made in a few di erent ways, either through
deduction, induction or abduction (Patel and Davidson, 2003). This study adopts a
deductive approach to achieve its objectives. This means that theory provides the
starting point for the study and empirical observations are subsequently made to fulfil
the purpose. This is necessary in order to understand the causes behind a possible
gap between theory and practice.

2,2 Primary Data

2.2.1 Literature and Articles

Literature and articles for this study were used as a foundation for the theory section and
were exclusively collected by searching in di erent databases. The library catalog of the
University of Gothenburg (GUNDA) was used for finding relevant literature on cash
management, while scientific articles on the subject were found by using the database
Business Source Premier (EBSCO). The research process included a wide range of
journals and keywords. Attention was especially given to the following three journals due

5
to their focus on small businesses: American Journal of Small Business, International
Small Business Journal and Journal of Small Business Management.
E ort was given to cover as much relevant literature as possible to get a deep
understanding of cash management. Both modern literature, older literature and
articles were studied. However, much of the Swedish literature on cash management
is dated. Books by Dolfe and Koritz (1999) as well as Larsson and Hammarlund
(2005) are more recent examples, and are both comprehensive. Dolfe and Kortiz
(1999) on their part have based part of their work on Karlsson (1996).
Articles published in the field were also rather old. Studies made specifically
concerning cash management practices of small firms are those published by Anvari
and Gopal (1983), Cooley and Pullen (1979) and Grablowsky (1978). However, they
were included in the study due to their high relevance to the subject. Literature and
articles on cash management procedures in small firms within the service industry
specifically were not found. This strengthened the reasons to go on with this study.
Refer to the reference section for a complete list of all sources.

2.2.2 Selection of Companies

When selecting the sample of firms to include in the study, the aim was to target a
homogeneous group of companies. The interesting side of a qualitative study is to examine
variations within the selected homogeneous group (Trost, 2005). Since the focus of the study
was to investigate cash management procedures of small consulting firms, a definition of this
group of companies was required. The European Commission o ers a standardised approach
to define this group of companies, where the main determining factors are the number of
employees and turnover or balance sheet total. Table 1 shows a summary of the European
definition of Small and Medium-sized Enterprises (SMEs).

Table 1: European Definition of SMEs

Company Category Employees Turnover Balance Sheet Total

Medium-sized < 250 e 50 m e 43 m
Small < 50 e 10 m e 10 m
Micro < 10 e2m e2m
Source: European Commission, 2005

Because this study is based on small companies, the decision was made to follow
the European definition of SMEs. Therefore, this study will investigate consulting
firms with 50 employees or less and a turnover of e 10 million or less.
The database Retriever Bolagsinfo was used to identify consulting firms in line
with our predetermined variables. This database contains financial information for all
Swedish enterprises and allows users to search for companies with variables of their

6
choice. Due to practical reasons regarding the database, priority was given to consulting
firms within the technology and IT industry. The search was also further narrowed down
to only include limited liability companies primarily in the Gothenburg area for
convenience. A number of consulting firms meeting the search criteria were then
contacted by phone and invited to participate in the study. Overall firms responded
positively to the purpose of the study, but most rejected the o er due to time constraints.
Ultimately, two consulting firms were included in the study. The main reason
for this was that the time available was limited. Also, the qualitative data of two
interviews was considered sufficient to fulfil the purpose of this study. One of the
companies specifically demanded to be anonymous in the study. For that reason the
decision was made to make the other company anonymous too.
The utilised method of obtaining a strategic sample is called convenience
sampling. A convenience sample is a sample selected at the convenience of the
researcher. Availability is also important to the researcher. This means that it is a
non-random sample and selected firms may not be representative to the population.
This implies that there is a risk that companies which chose to participate are similar
in certain regards. The possibility of selection biases can therefore not be excluded
(Trost, 2005). The sample of this study lies somewhere between the categories small
and micro on the European scale. Refer to Table 2 for further details.

2,2,3 Selection of Respondents

In order to obtain the information required, each respondent had to be in a position of

substantial insight into the firm’s financial strategy and economic routines. Therefore,
the CEO and the CFO of each firm were preferred as respondents. Both the CEO
and the CFO were interviewed at Company A to get full insight into their business,
but at Company B only the CFO was interviewed. This respondent was the former
CEO of Company B and therefore had broad knowledge about their business and
had access to all required information. It is worth noting that the respondents have
very di erent educational backgrounds. CEO A and CFO A both have formal
education in business administration, while CFO B has education within the field of
the company’s core business.
Table 2: Companies and Respondents of the Study

Objects of Study Employees Turnover Respondents

Company A 14 SEK 13.8 m CEO A CFO A
Company B 23 SEK 23.9 m CFO B

7
2.2.4 Interviews

There are basically two approaches toward interviews. The first is the structured
approach, which often is associated with quantitative studies. The second approach is
less structured, more informal and often associated with qualitative studies. Note that
structure in this context refers to the way questions are asked rather than to the structure
of the interview template itself and the number of answer alternatives (Trost, 2005).
For this study an interview template was developed based on cash management
theory presented in the theory chapter. This template was divided into four sections. The
purpose of the first section was to get an overall picture of the company. The second
section included some general questions about cash management. Section three dealt
with business cash flows and administrative routines, while the last section focused on
liquidity issues. Refer to Appendix A for the full list of questions. Regarding the
interviews, the less structured qualitative approach was preferred due to its ability to
better capture the respondents view on our questions. The interviews can therefore be
said to have been semi-structured (Blumberg, Cooper and Shindler, 2005). The intention
was to use face-to-face interviews. However, problems with finding participating firms
forced us to make one telephone interview.

2,2,5 Execution of Interviews

To get a better understanding of how the firms apply cash management and how
decision makers think, the respondents were encouraged to speak freely at the start of a
each new topic. The interview template served only as a checklist to ensure that all
questions under each topic were covered and also helped keeping the interview on track.
The respondents were also allowed to study the contents of the interview template in
advance. This was necessary because the time of each interview was limited to an hour
and a half and sought answers to a wide range of questions. There was only time for one
interview with each firm. Questions that were left unanswered were followed up by email.
Three interviewers were present at each interview session in order to
minimise the risk of misinterpreting answers and to ensure quality. However, only
one person conducted the questioning while the other two people took notes on
responses and contributed clarifying or follow-up questions when necessary. The
interviews were recorded to support later analysis and the recording equipment was
thoroughly tested before each session. The respondents showed no sign of anxiety
or apprehension. They had also been informed that they would be anonymous.
Both respondents of Company A were present during the interview because
together they had a full view of the financial situation of the company. This interview took
place at the office of Company A. As for Company B, only one respondent was required
to cover all questions. This telephone interview resulted in comprehensive work

8
material. The respondent was very open and spoke freely about the questions and
this interview gave as much information as the face-to-face interview.

2,3 Validity and Reliability

The concept of reliability is built on standardised quantitative studies where variables

are measurable. Qualitative interviews on the other hand assume a low degree of
standardisation and structure. According to Trost (2005) it is therefore slightly
peculiar to talk about reliability in regards to qualitative studies. Adding more
interviews would increase the reliability and validity of the study. The risk is that
chance biases the selection of companies, since relatively few have been included in
the study. Hence, it is important to be aware of this during the final analysis stage.
From a statistical point of view it is therefore not possible to draw any general
conclusions from the results of the study (Trost, 2005). Nevertheless, what this study
does is to indicate behavioural patterns of managers of small service companies.
The study exemplifies how small consulting firms work with cash management in
reality and explains the underlying rationale of their cash management decisions.

3 Theoretical Framework

The theory in this section is broadly divided into three areas. The first provides a
general introduction to cash management. Next, theory on efficient cash
management practices is presented. This provides the foundation for how companies
should work with cash management. The last area presents the findings of previous
studies on cash management practices, relevant to the purpose of this study.

3,1 An Introduction to Cash Management

Cash management can be defined as “making money on money and making money
on efficient procedures and support systems” (Dolfe and Koritz, 1999, p.1). Cash
management includes how to handle and manage liquidity. If a company does not
have e ective routines to handle receivables, payments etc. a vast amount of capital
might be unnecessarily tied up within the organisation. Better would be to untie this
capital and use it for investments with higher return.
Cash management does not include the handling and managing of stock.
Treasury management is similar to cash management, but it puts more emphasis on
placing and borrowing money in the short-term (Larsson and Hammarlund, 2005).
Cash management impacts the company’s shareholder value and profitability in
the long and short-run. Active and efficient cash management will influence the
shareholder value and profitability positively, while ine ective and negligible management

9
will have a negative impact (Dolfe and Koritz, 1999).
Cash management can also be defined as the management of processes to
ensure the timely collection of cash inflows, appropriate control over disbursements,
and e ec-tive use of cash assets and liquidity for everyday business operations.
These processes are often departmentalised in larger companies and managed by a
specific cash manager or responsible person. In mid-sized or growing companies
these positions are not developed and not a prioritised matter. In these organisations
the cash management processes may not be handled e ectively. E ective cash
management means that the income benefit of the net interest is maximised. E ective
cash management allows for funds to be available when there is a crisis or when the
firm wants to expand their business (Gleason, 1989).

3,2 How to Manage Liquidity and Cash Flows

3.2.1 Managing Liquidity

Liquidity An organisation purchases resources and transforms these resources into

products and services for the customer. The relationship between the value of the
input and the output creates the profitability. The higher the value of the output
compared with the input, the higher the profitability. These inputs and outputs lead to
inflows and outflows of cash. The inflows increase the liquidity and the outflows
decrease the liquidity (Blomstrand and K¨allstr¨om, 1991).
The capital market is not perfect. The earnings for holding cash may be lower
than the market rate and raising cash may have a higher cost due to transaction costs.
Liquidity has an opportunity cost because of these market imperfections (Berk and
DeMarzo, 2011). Each organisation should try to find an appropriate level of liquidity to
minimise their costs. Firms with close access to capital markets have incentive to hold
less cash and companies in a growing phase might hold more cash for future
investments. There are three reasons why firms hold cash according to Berk and
DeMarzo (2011). The transactions balance is the amount of cash a company needs to be
able to meet its day-to-day needs. Secondly, the precautionary balance is the amount of
cash needed to compensate for uncertainty associated with its cash flows. Finally, the
compensating balance is the amount of cash needed to satisfy bank requirements.
The conflict of how much cash to hold and how much to invest is a balance
between always having enough cash to cover outflows and remaining as profitable as
possible by maximising interest earnings and avoiding unnecessary costs. The cost of
high liquidity is the opportunity cost of not being able to place the cash in the capital
market at higher return. On the other hand, there is the cost of not having enough cash
and not being able to pay bills on time, including penalty costs. The issue is to weigh
these costs of high and low liquidity in order to get a feasible liquidity level (Blomstrand

10
and K¨allstr¨om, 1991).
The optimal liquidity level di ers between organisations. Theoretically, the aim
is to have no interest bearing funds on accounts, and surpluses should be invested in
financial instruments with higher return (Dolfe and Koritz, 1999). The question is if
this is a realistic level and if the aim to get a zero balance is worth the e ort. If the
market rate of return is close to the return on the bank account, the e ort in trying to
place the surplus on the money market may be unwarranted. Larger corporations
often have negotiated such high rates of return on their bank accounts, that they do
not benefit from placing their surpluses on the money market at all. Some companies
may benefit from the extra e ort of a zero balance goal, while others may not (Dolfe
and Koritz, 1999).

Liquidity Forecasting The better cash is managed the better the opportunities are to
get a more feasible liquidity. This cash should be handled as efficiently as possible to
improve the net interest income. An important tool to reach this goal is organised
liquidity forecasting. These forecasts can easily be handled with computer software
(Larsson and Hammarlund, 2005).
Liquidity forecasting means trying to predict future inflows, future outflows,
how to place surpluses and finance deficits. The aim is to see how these aspects a
ect future liquidity (Blomstrand and K¨allstr¨om, 1991).
Liquidity forecasting is made both long-term and short-term. The short-term
forecasting is important to be able to ensure that sufficient funds always are available
and to handle short-term fluctuations in cash demand. The short-term liquidity needs
are usually monthly forecasted one year ahead. The emphasis is on capturing the
monthly fluctuations and to identify seasonal liquidity fluctuation (Dolfe and Koritz,
1999). The more fluctuating the cash flows are, the more important it is to identify
and forecast the liquidity level. There is also the issue of deciding which cash flows to
include in a forecast. The focus should be on the large flows of cash that a ects the
liquidity position and not on insignificant streams (Dolfe and Koritz, 1999).
The short-term liquidity forecasting should also be complemented with a
short-run plan to identify the everyday in- and outflows and making sure that funds
are available. This plan should be more detailed to meet the daily demand for cash
(Larsson and Hammarlund, 2005).
The liquidity forecast should specify a specific time period and try to estimate
inflows and outflows, both the amounts and the timing of the flows. The time period
varies between di erent organisations depending on industry, cash flow patterns, firm
size and other factors (Blomstrand and K¨allstr¨om, 1991). The most difficult flow to
predict is the inflow from customers, since it might be hard to estimate when the
customer actually is going to pay. The forecast must therefore be based on the previous

11
experience of payment patterns of the customer, which makes it important that the
budget is subject to change (Blomstrand and K¨allstr¨om, 1991).
One liquidity issue is the timing of cash flows. The outflows usually occur before
the inflows, since the purchasing of resources needs to be done before the incomes from
the customers occur. This timing problem is especially prominent in newly established
and growing companies, since many investments need to be made in the growth phase
and outflows usually exceed the inflows (Blomstrand and K¨allstr¨om, 1991). If the inflows
do not cover the outflows, the outflows must be financed somehow. In more established,
healthy firms the situation usually is the opposite; the inflows exceed the outflows. The
surplus cash must be placed somewhere where the return is as high as possible. The
cash management problems organisations experience di ers depending on their
respective situation (Blomstrand and K¨allstr¨om, 1991).
The liquidity forecast will lead to the planning of placing cash surpluses and
might also a ect the timing of ordering from suppliers. If the company receives a large
payment from a customer it might be a good time to invest the excess cash in the
operation instead of just leaving the money on an account with a low interest income.
Alternatively, place the money where the return is higher. The purpose with the
forecast is the timing of future in- and outflows to get an as efficient cash
management as possible (Larsson and Hammarlund, 2005).
Many companies need short-term financing to cover temporary deficits at
some time. The prediction of future deficits is important to get beneficial financing.
There are situations where the inflows cannot cover the outflows and the liquidity
level is temporarily negative. In these cases the organisation needs to find a financial
solution. If deficits are predicted in advance, it is easier to get better conditions of the
financing solutions (Larsson and Hammarlund, 2005). The sooner you know when
and how much cash you will need to borrow, the better are your conditions to find a
good solution. In summary, good liquidity forecasting is beneficial in both the case of
a positive and negative liquidity level.
One solution to short-term financing is factoring. Factoring means that the
company in need of cash sells invoices to a factoring company, which is responsible
for the dunning of the invoice. The company that sells the invoice receives the
invoice payment instantly, but does not receive the whole amount stated on the
original invoice (Dolfe and Koritz, 1999).
The beneficial results of active liquidity forecasting are firstly the efficient bank
management, which makes a comparison of the conditions between accounts
possible. Secondly, the higher return on the investment of temporary cash surpluses
and the lower interest of loans in temporary deficits (Dolfe and Koritz, 1999).
Long-term forecasting is provided to the management in order for them to make

12
long-term decisions such as level of liquidity reserves, capital structure strategy and
investment decisions. Long-term liquidity forecasting is usually covering three to five
years. The main di erence between long- and short-term forecasting except from the time
aspect, is that long-term forecasting deals with more uncertainties such as inflation and
demand fluctuation and more assumptions need to be made. Therefore, long-term
forecasting is appropriate through simulation models. (Dolfe and Koritz, 1999)

3.2.2 Inward Cash Flows

Managing cash flow processes involves managing inward and outward cash flows.
As explained under limitations (Section 1.4), the attention of this this study is given to
cash inflows due to their better potential of a ecting the liquidity of small consulting
firms. Below, Figure 1 illustrates the cash receipt process of firms. This process is
sometimes referred to as the credit arrow. The inward cash flows mainly consist of
accounts receivables, and efficient cash management implies receiving inflows as
fast as possible, for instance by trying to shorten the credit time, which is the time
between invoice date and payment (Dolfe and Koritz, 1999). This will increase the
liquidity as well as allow firms to earn interest on payments.

Figure 1: The Cash Receipt Process

Proposal Order Delivery Invoice Due date Dunning Receipt

Source: Dolfe and Koritz, 1999

Proposal The first step of a business process involves shaping tenders that later result in
the closure of agreements. This is the most important step of the cash receipt process
due to its inherent ability to a ect future cash inflows (Dolfe and Koritz, 1999). By a ecting
the conditions of an agreement, such as credit terms, companies can minimise cash
management inefficiencies. However, the room for applying cash management practices
depends on industry and firm structure. For instance, an industry exposed to severe
competition with homogeneous products reduces possibilities to influence credit and
payment terms (Hedman, 1991). One example of this is the automobile industry. Small
firms may also be forced to adjust themselves to larger clients in other regards, for
example in administration. It is therefore important to carefully analyse the relations
between buyers and sellers to clearly understand the room for maneuver in the shaping
of agreements (Hedman, 1991). All information relevant to the customer must be stated
in the proposal (Dolfe and Koritz, 1999).
When negotiating terms and conditions for an agreement the challenge is to

13
receive the most favourable terms given existing constraints. An agreement is
basically concerned with the following four areas: delivery terms, delivery method,
payment terms and payment method (Hedman, 1991).
It is important to receive inward payments as soon as possible to avoid
unnecessary credit float. Not doing so always involves a cost to the company and it
also increases the risk of the firm (Dolfe and Koritz, 1999). One possible way of
tackling this problem would be to demand a higher price to compensate for the risk
and the term of credit. As far as the term of credit is concerned, it varies between di
erent countries and industries. In Sweden it is common practice to give customers a
credit term of 30 days net (Dolfe and Koritz, 1999). It is important that both parties
agree on when the credit is due and when the credit term is initiated. It may be equal
to the date of the invoice or the arrival date of the invoice. Some companies have the
practice of adding a number of days to the date of the invoice to compensate for
postal services (Dolfe and Koritz, 1999).
In order to decrease the credit term companies should try to demand advance
payment whenever possible, especially if a deal concerns large or special orders
(Dolfe and Koritz, 1999). The credit time for large orders can also be reduced by
dividing payments into several payments at numerous times. Payment terms are also
concerned with the question of applying reminder fees and penalty interest when a
payment is overdue. Penalty interest as well as reminder fees can be renegotiated
within the frame of present legislation to be used as a means of putting pressure on
customers paying their invoices late. However, it is important not to forget that the
business relation on its own may be more important than the right to exert this right
(Dolfe and Koritz, 1999).
How the payments are being made is another issue. Payments can be made
in various ways, but electronic bank transfer straight to an interest bearing account is
generally the most efficient method, though it depends on country and situation
(Dolfe and Koritz, 1999). The most crucial issue is to minimise the time from when a
payment is made until the company is earning money on it. Finally, by investigating
the creditworthiness of customers, companies can reduce the risk of not receiving
payments (Dolfe and Koritz, 1999).

Order In the order stage an incoming order should be reviewed in order to certify that it
corresponds to the initial proposal and any deficiencies that are found should be
corrected. For manufacturers with a lot of capital tied up in inventory it is of interest to
process orders as quickly as possible to untie capital and increase customer satisfaction
(Dolfe and Koritz, 1999). For service companies the situation is somewhat di erent, since
a service is consumed in the same moment it is produced. Accordingly, there will be no
tied-up capital and of greater importance will instead be to utilise company

14
capacity and resources efficiently.

Delivery It is important that the delivery in every respect coincides with the order. If
something is wrong the risk is large that payments will be delayed. Possible errors are for
instance product or service deficiencies, damages, wrong quantity, unsatisfactorily
executed service etc. Errors like these will result in delayed cash flows and should
therefore be avoided. Another negative e ect of faulty deliveries is that it might hurt
business relations (Dolfe and Koritz, 1999). As far as products are concerned it is
important to deliver as quickly as possible in order to speed up inward payments
(Bennet, 1987). The delivery of services, however, is di erent from the delivery of
physical products. A service is delivered in the same moment it is executed and the
execution of it has a certain duration. For e ective cash management it is therefore
important to carefully regulate when, where and how a service is to be delivered
(Hedman, 1991). Hedman also mentions two important qualities characteristic to
companies who are good at delivering services. The first is that the responsibility
between the contracting parties is mutually regulated in detail. The second is that extra
attention is paid to delivery terms such as how a task is to be executed and presented to
the customer. By that, unnecessary delays caused by misunderstandings and
ambiguities can be avoided.

Invoice In order for customers to be able to pay it is important they receive the
invoice as soon as possible. The ultimate goal is as always to receive payments as
early as possible. An invoice should therefore be created and sent in connection with
the shipping of an order or after a service has been fully executed. The aim should
be set at invoicing customers on a daily basis to avoid hidden credit. Earlier invoicing
should only occur within the scope of special contract terms. As far as the date of the
invoice is concerned it should always coincide with the date of delivery and the
delivery date is regulated either by law or contract (Dolfe and Koritz, 1999).
Electronic billing is an alternative for improving the cash flow of a company, since it is
a faster method for dispatching invoices. It also make it possible to ease the
administrative load of traditional paper bills.
It is important that an invoice includes all the essential information for customers
being able to execute their payments without confusion. It is also important that the
information is well structured and correct to avoid complaints resulting in delayed
payments. If things are made clear from the beginning it will be easier to quickly recover
payments (Dolfe and Koritz, 1999). As far as the due date is concerned it is appropriate
to clearly state when a payment must have reached the seller (Dolfe and Koritz, 1999).
Sometimes invoices are delayed only because invoice data, such as internal order
numbers and references, is missing. According to Dolfe and Koritz (1999) one solution to this
problem is to bill customers in accordance with the underlying agreement anyway

15
to avoid delay.

Dunning The last stage of the cash receipt process constitutes dunning activities. These
activities serves the purpose of encouraging or forcing customers to pay their debt no
later than on the due date (Dolfe and Koritz, 1999). As suggested earlier the ability of a
company to recover debt is often determined through the underlying agreement, which
regulates the ability to charge reminder fees and penalty interest. Therefore, companies
should carefully consider the use of these practices as early as in the proposal stage.
Reminder letters can be sent after an invoice is due, but it may in some cases be
appropriate to remind customers even before this happens. Reminders can also be made
by telephone. If customers do not pay in time it may be advisable to have a goal set for
how late payments to tolerate (Dolfe and Koritz, 1999). It is important to take the risk of
hurting customer relations into consideration if reminder fees and penalty interest are to
be used. According to Dolfe and Koritz (1999) it is not unusual that the sales force
discourage the use of penalty interest for this reason.

3,2,3 Outward cash flow

Despite the primary focus of this study on inward cash flows it is in this context worth
mentioning the cash disbursement process. It is very similar to the cash receipt process
described in Section 3.2.2, with the exception that the delivery stage is replaced with
order receipt and the final stage with payment. Instead of receiving payments as early as
possible, focus now switches to delaying disbursements as long as possible to fully
utilise credit and reduce the loss of interest. (Dolfe and Koritz, 1999).

3,3 Small Business Cash Management Practices

Previous studies have been made on the cash management practices of small
businesses. Quantitative studies made by Cooley and Pullen (1979) and Anvari and
Gopal (1983) are the most recent. A third study by Grablowsky (1978) on management of
the cash position is also relevant. The results of these studies reveal that small firms in
general show little understanding of cash management practices. However, according to
Cooley and Pullen (1979) some firms in their study were also quite sophisticated in
controlling their cash flows. The relevant findings of these studies are presented below.

3.3.1 Forecasting

Anvari and Gopal (1983) sent a questionnaire on cash management practices to 500
small Canadian firms. This study revealed that only 53 per cent of the respondents use
cash forecasting. The corresponding figure for large Canadian businesses was 94 per

16
cent. In cases when small firms did use forecasting, the planning horizon was mostly
either one year and/or one month.
Cooley and Pullen’s (1979) study on 122 petroleum marketers in the U.S.
showed that only 28 per cent of the respondents use forecasting. This was similar to a
previous study on small U.S. firms, where 30 per cent used cash forecasting
(Grablowsky, 1978). Three quarters of those who did apply forecasting in Grablowsky’s
study used a planing horizon of six months or less. Some firms used very sophisticated
cash forecasting techniques, but these were not many (Cooley and Pullen, 1979).

3,3,2 Cash Holding

In Anvari and Gopal’s (1983) study 26 per cent applied formal methods for deciding an
appropriate liquidity level. Only 71 per cent of the small firms checked their current
account balance regularly, compared to over 90 per cent of the large firms. Slightly more
than half of the firms had excess cash during 1980 and the amount increased with firm
size. When investing surpluses, the most popular method of short-term investment was
the savings account. A majority dealt with one bank only. Factors a ecting the choice of
bank were location, lending limits, price of services, and reputation. Only 57 per cent
negotiated the rate of return and cost for services. Anvari and Gopal state that “the
managements of Canadian small firms do not generally seem to recognize cash as a
working asset, and idle cash as a liability” (Anvari and Gopal, 1983, p.58).
According to Cooley and Pullen (1979) companies set the liquidity level to
match currents costs. They also wanted to have enough cash to be able to take
advantage of supplier discounts and to cushion the e ects of unexpected cash
requirements. Grablowsky’s (1978) findings were in line with these results.
73 per cent of the firms in Cooley and Pullen’s (1979) study had recently
experienced cash surpluses and these were invested in savings accounts (57 per cent),
checking accounts (25 per cent), or treasury bills (15 per cent). Only eight per cent of the
firms invest in the stock market. The study also showed that by considering other
investment opportunities companies generally could increase profits.

3,3,3 The Credit Arrow

The firms in Cooley and Pullen’s (1979) survey applied cash control practices to a
varied degree. According to Grablowsky (1978) firms did not find it worth the e ort to
spend time and money on reducing credit float. In their opinion, it would not improve
the profits of the firm.

17
3,3,4 Important Conclusions From Previous Studies

As mentioned in the preamble to this section, all these studies reveal that small firms in
general show little understanding of cash management. Both Cooley and Pullen (1979) and
Anvari and Gopal (1983) conclude that many firms skip the important step of forecasting.
Without forecasting, it is difficult to adapt other cash management procedures with the
intention of improving company efficiency and profitability. Grablowsky (1978) adds that the
lack of cash management procedures may not even be considered a problem by business
managers. Furthermore, he concludes that cash for the most part appears to be managed “on
the basis of ad hoc opinions of managers, rather than soundly conceived cash management
techniques”(Grablowsky, 1978, p.43). Surplus cash was mostly invested in saving accounts,
checking accounts and treasury bills (Cooley and Pullen, 1978). In short, the reason why
small firms did not apply as refined cash management techniques as large firms appears to
be due to the lack of time and resources. Cash management took the attention of managers
away from more important problems. The level of awareness, however, also played a
prominent role (Cooley and Pullen, 1979).

3,4 Summary

Cash management is ultimately about the planning and management of cash flows.
Companies can increase profitability by deciding an appropriate liquidity level, using cash
management techniques such as forecasting, and having efficient routines for handling
inflows and outflows of cash. However, previous studies indicates there is a gap between
theory and practice of how small firms use cash management practices. In reality many
companies show little understanding of cash management and it is not a prioritised issue.
Forecasting is an important tool for handling cash efficiently, but this is not adopted by
many companies in practice. Cash deficits should be forecasted in order to be financed
as appropriately as possible. Cash surpluses should be invested where the return is
higher compared to the business account, which is the opposite of how companies
actually act. Most companies keep their cash in their bank accounts at a relatively low
rate of return. Companies should aspire at receiving their payments as fast as possible
and paying their invoices as late as possible, without inducing any extra fees. The
reasons why small firms do not apply cash management to the same extent as large
companies do, seems to be due to lack of time and resources. From here focus is turned
to the consulting firms of this study to investigate how they use cash management
practices and why they apply these practices in their business.

18
4 Empirical Findings

4,1 Introduction to Companies

4.1.1 Company A and Their View on Cash Management

Company A o ers IT-consulting services within the automobile industry. The cash
management function is controlled by CFO A and CEO A, who both have educational
experience in business. CEO A is also one of the two founders and owners of the
company and has previous experience in working with finance.
Cash management means the handling of money short term, according to
CEO A. He states that it includes the handling and management of inflows, outflows,
equity and liquidity. Cash management is an important tool in an organisation,
especially in a small organisation. Company A takes an active position in cash
management, but he also admits that there is room for improvement. The cash
management function is not connected to an overall financial strategy, but they still
have a cash management awareness.

4.1.2 Company B and Their View on Cash Management

Company B is owned and managed by the three founders and CFO B is one of them.
CFO B has an education related to the company’s core business, but he has no
education within business or economics. Cash management means two things to
Company B; the m ofanagement cash in such a way that the money is not idle and
works for you, and the timing of inward and outward cash flows. CFO B feels that
these are areas that could be improved since their largest focus today is their core
operation. He also admits that cash management is something that has been
overlooked and not prioritised because of other more urgent matters.

4,2 Managing Liquidity, Company A

4.2.1 How Much Cash Does Company A Hold and Why?

CEO A explains that the company has an approximate aim of a liquidity level of
approximately one million SEK. This goal is CEO A’s estimation of the organisation’s
approximate total costs per month. He believes that one million is a reasonable liquidity
bu er for the company, but cannot really motivate in detail why he thinks this is an
appropriate level other than that he thinks it is reasonable and the cash reserve has
always covered the outflows. CEO A states that he has a goal of always being able to
cover the outflows and wants to keep a high liquidity bu er to reach this goal. The
company has never been in a situation where they did not have enough cash to cover
their expenses other than in the start-up period of the company when leveraging was

19
necessary. This bu er should cover any unforeseen expenditures and also the daily out-
flows. CFO A does not think that a close to zero balance on the business account would
be reasonable, but he does believe that they could decrease their level of liquidity since
there is an opportunity cost of holding cash , but this has not been considered earlier.
The e ort of making forecasting that precisely foresee every cash flow and the
risk of the cash flows not arriving as planned, is not worth the extra return the money
might lead to when lowering the liquidity level and placing cash more beneficial. The
fact that the market interest rate is low does not a ect their decision of liquidity level
according to CEO A.

4.2.2 Financing Deficits and Placing Surpluses

The company uses the bank SEB for their financial services. They own one
check/business account for daily in- and outflows of cash that have a rate of return of 1.65
per cent. The company also has three depot accounts with a return of 1.65 per cent, same
return as on the business account. The surpluses exceeding their aimed liquidity level, are
placed on the depot accounts. The money on the depot account is subject for placement
in the stock and bond markets depending on the market opportunities which makes the
return on these money potentially higher. The balance on this account fluctuates a lot, as
the market changes. If there are many investments and placing opportunities available the
depot might be close to zero, but if the market is uncertain it might have a higher level.
SEB assists the company through two advisors, one for the checking account and one
investment advisor. CEO A communicates with CFO A to see if some money should be
transferred from the business account to the depot account.
The situation that the balance on the depot account is too low to cover the
amount needed for the business account has never occurred and this would not be a
serious issue if it occurred, according to CEO A. If it would happen, CEO A does not
believe it would be hard to get a loan from the bank at a beneficial rate since the
company has a stable ground and they have a good relationship with the bank.
The company invest and place their money in bonds and stocks in the long term.
They also pay dividends to the stock owners every year.

4.2.3 Liquidity Forecasting

Short-term forecasting is something that Company A works intensively with. CFO A has
ongoing communication with CEO A about their liquidity situation and 2-4 times a month
they have more detailed check-up. Around once or twice a month CFO A provides CEO
A with a liquidity forecast for him to analyse and to see if any adjustments need to be
made to the account balance. The forecast report describes the liquidity situation today
and the expected in- and outflows for the coming 20-30 days. The liquidity

20
report shows what the liquidity approximately will be at the end of the forecast period.
CFO A experiences that the cash flow forecast matches the actual cash flows as
precise as necessary for efficient liquidity planning. CFO A emphasises that a more
detailed forecast report would just take too much time and e ort and weigh out the
benefits. CFO A explains that he does not try to match the in- and outflows since
they already have the marginal to handle the situation where all the outflows would
occur before the inflows during one month. He always has the depot accounts as
backup if the business account would unlikely reach a zero balance.

Long-term forecasting is more difficult since new projects arrive continuously and
randomly over time. CFO A does not think it is important to forecast cash flows in a
time horizon of more than a couple of weeks, but he does consider identifying larger
future outflows important. Because the company is pretty small, CFO A argues that
he has a pretty clear future plan of the larger cash flows in the upcoming months.

4,3 Managing Liquidity, Company B

4.3.1 How Much Cash Does Company B Hold and Why?

CFO B is aiming at maintaining a minimum level of liquidity of two million in order to

avoid liquidity shortages. Two million are slightly more than the average outflow of
cash each month, but some fluctuations do occur. Rent and payroll are the two major
kinds of recurrent disbursements. To be unable to pay the salaries of employees
would be a nightmare for any company, states CFO B. Especially for this company
since cash flows have been positive every month since the beginning of 2011.
Cash management and liquidity have up till now not been the primary
concerns of Company B. The focus have instead been put on core business and
business operations. However, CFO B believes that the company now has reached a
stage where it would be appropriate to focus on administrative aspects of their
business too. Especially if the strictly positive trend of net cash flows continues and
no current expansion possibilities exist. CFO B thinks that a close to zero balance on
their business account is reasonable, but before steps in that direction can be taken
alternative investment opportunities must be considered to determine if it is worth the
e ort. This strategy would of course increase the risk of liquidity shortages.

4.3.2 Financing Deficits and Placing Surpluses

Company B uses the bank SEB. Presently a single interest bearing bank account is
used for all business cash flows. The interest is one per cent for this account.
Financial services provided by SEB and used by the company include factoring,
check credit and automated invoice reminding.

21
 To prepare for situations of liquidity shortage the company has signed a
factoring agreement. This agreement would if used today cover 1.5 months of
average costs or approximately SEK 3 000 000. Company B also have a check credit
of SEK 500 000 at their disposal at a cost of SEK 5000-6000 per month. According to
CFO B, the interest cost on the check credit is higher than for a company loan, but
he cannot specify the interest cost more precisely. The factoring service has
historically been used during periods of rapid expansion. However, it has only been
used once to cover a temporary operational setback caused by the loss of a major
customer in 2010. The factoring agreement is still in e ect, but is currently not used. It
is merely used as a safety bu er to cover unexpected liquidity shortages, or as CFO
B succinctly puts it: “...the factoring agreement and check credit is kept to be able to
sleep well at night”. The overall strategy of the company is still to expand operations
whenever possible. The factoring agreement is therefore kept for this purpose too.

4.3.3 Liquidity forecasting

Short-term forecasting is not a prioritised matter, according to CFO B. The main

reason for this is that the current level of liquidity is high. The additional e ort of
applying liquidity forecasting procedures would only be worth the e ort if Company B
aimed at a lower level of liquidity. As mentioned earlier this is not a priority today.

Long-term forecasting is only used to some extent. Company B engages in some

long-term liquidity planning, but only roughly when saving for new investments. The
forecasts are not based on cash flow reports. CFO B emphasises that liquidity
planning has not been an issue of priority since the business always has generated
positive cash flows with an exception of 2010.

4,4 Managing Inward Cash Flows, Company A

4.4.1 From Proposal to Order and Delivery

The proposal process starts with CEO A meeting a potential customer for discussing
business and agreement terms. There are two di erent ways of closing a deal with a
customer. The first process starts with the conditions of the agreement being established
and Company A creates a quote. This quote is sent to the customer in order for the
customer to approve through a final contract signed by the two parties. The quote is
approved and the deal is closed through a mutual agreement. In some cases the deal is
closed at a personal meeting and the quote is simply signed and becomes the final
contract without any editing for the final contract. This is more common in agreements
with larger corporations when the proposal process often is a more automated and less

22
time-consuming process. Conditions for their services are described in detail in the
contract, but CFO A explains that mistakes requiring correction do occur.
CFO A usually does not check the creditworthiness when forming
agreements with new customers, because most of their customers are large, well-
known organisations. However, if they are about to close a deal with a new smaller
customer CFO A usually runs a credit check to make sure that the customer will be
able to pay their bills. CFO A does not collect any customer statistics on this, but he
explains that he considers himself to have a good view over the inflows of cash and
the history of payments, since he is in charge of all the invoicing.
CEO A states that there is no room for negotiating the terms of agreements with
the larger customers, since their contracts already are established and only for the
supplier to sign. He poses that this is a typical process in the larger organisations in the
automobile industry. Around 50 per cent of the customers of Company A are included in
this section, but CEO A explains that there is more room for negotiation with the other
half of their customers. For these customers Company A has standardised contracts, but
for the larger corporations the customers themselves set the terms of the contracts. The
standardised contracts establish a credit time of net 30 days, but their largest customer
has a credit time of net 45 days, which is non-negotiable. Some new projects even have
a credit time of net 90 days. The extra credit time does not lead to any extra fees for the
customer. The credit time is also fully used and payments are usually received on the
due date. Company A does not o er any cash discounts since they do not think this
would be profitable for the company.

4.4.2 Invoice

When a contract has been signed and the service has been fulfilled CFO A sends an
invoice based on the timesheet of the employee. The invoice for a project is usually
sent as soon as the project is finished, but ongoing projects are invoiced once a
month. It does happen that CFO A waits to invoice a customer even though the
project is finished, in order for him to do all the invoicing at the same time at the end
of the month. CFO A means that a monthly invoice standard is established because
it is the most e ective way to send invoices, to invoice all customers at the same
time. Their largest customer also demands monthly invoicing.
CFO A usually receives the timesheets from the employees at the end of every
week. He sometimes experiences that this does not work optimally and occasionally the
timesheets are turned in too late. The hours that the customers are being charged are
registered in a time bank and are also identified to which project the hours should be
debited. CFO A also registers the hours into an occupation template and templates for
the larger customers for filing. CFO A declares that the invoicing is made at the

23
end of the month according to the templates including number of hours worked and
for which project. The invoice also includes other expenditures associated with the
executed service, such as flight tickets and travels made for the customers count.
The receipts for these expenditures must be enclosed with the invoice and the
collecting of receipts often delays the invoice from being sent.
CFO A is the only individual responsible for the invoicing and the task will be
delayed if he for some reason cannot perform it. All invoicing is made by mail and the
invoices are printed at the office and sent to the customers. On the invoices
Company A only specifies the due date. They do not state when the payment must
have reached their bank account.
CFO A estimates that about five per cent of all the invoices sent have some kind
of deficiency. Usually deficiencies are in the form of incorrect order numbers, which
means that the invoices must be remade with the correct order number. This will cause
the credit time to start all over again for the customer and this is also the main reason
why credit notes are made. The average credit time used by customers is the one stated
on the invoice. The customers of the company usually make their payments one the due
date, but approximately five per cent of all the invoices are delayed. Payments are made
with bank checking and the money is placed on a interest bearing business account.
Company A has experienced problems with receiving essential invoice data
from their largest customer late. This has made them unable to dispatch invoices in
accordance with the underlying agreement and sometimes they have been forced to
pay taxes before the actual inflow of cash. In the most extreme cases this has led to
increased credit float by several weeks. The matter has of course been raised with
the customer, but due to the unequal balance of power Company A has had no other
choice but to accept the situation.

4.4.3 Dunning

In the case when the payment of a customer is not received CFO A explains that the
easiest way is to just give the customer a call to see what the problem is. Usually
problems is instantly solved and the payment is made within a couple of days. CFO A
does not charge any reminder fees or penalty interest because he believes that it would
damage customer relations and would not be worth the extra e ort. He values the
customer relation higher than the ability of charging reminder fees and penalty interest.

4,5 Managing Inward Cash Flows, Company B

4.5.1 From Proposal to Order and Delivery

Company B obtains orders in two ways. The proposal process either starts when Company B
is contacted by a consulting broker on the behalf of a client, or when a customer

24
contacts Company B directly. Consulting brokers apply standardised industry contracts.
These contracts may be modified, but according to CFO B it is not very common. When
Company B is negotiating directly with customers standardised industry contracts are
also used. However, the room for adjusting the terms of an agreement is larger.
In both cases the standardised contracts apply a credit time of net 30 days.
Only one of their customers is o ered a credit time of net 90 days. This is an explicit
demand from the customer and consequently not open to negotiation. Company B
would normally not accept such credit terms. However, this customer is likely to
provide a long term source of income and since only small amounts of money are
involved the financial risk is low. The consultant stationed at this customer is also
very pleased with working there. From CFO B it seems like this might also be a
reason why a longer credit term than normally has been accepted. The extra credit
time for this customer does not involve any additional fees.
Given credit term is always fully utilised by customers and payments are
generally received on the due date or shortly after. It happens that payments are split
into several instalments to generate a more even cash flow.
CFO B does not feel that it is necessary to check the creditworthiness of their
customers, because most of the customers are larger well-established organisations.
However, creditworthiness is not checked for small unknown firms either. CFO B explains
that he is aware that small and new established firms seldom have good
creditworthiness, but he rather takes the risk of doing business with these firms in order
not to miss out on a potential future customer. Since a vast amount of their customers
are consultant brokers, CFO B believes that they usually take a larger risk towards the
final customer. The brokers are the ones that have the final customer responsibility, but
the brokers can also default, which definitely would a ect Company B negatively.

4.5.2 Invoice

Invoices for each project are always sent at the end of each month no matter if a
project has been finished earlier during the month. According to CFO B most of
Company B’s larger customers prefer to receive invoices on a monthly basis. It also
gives CFO B a comprehensive view over the current situation. He likes being able to
double check time reporting to make sure it corresponds to the number of hours
invoiced. Accordingly Company B seldom receives invoicing complaints.
Furthermore, he experience that the time left for him to engage in core business
activities increases when the invoice handling is limited to one occasion each month.
Company B has a developed custom-made software for time reporting making it
easy for employees to register their work online at the end of each day. If employees for
some reason would fail to perform this daily routine an automated email is immediately

25
sent as a reminder.
At present CFO B is the only individual at the company responsible for invoice
handling. In case he for some reason cannot fulfil this task, for instance as a
consequence of illness, the handing of invoices will be delayed. For this reason another
employee is currently being trained at Company B to be able to act as a stand-in.
Company B uses a business system called Fort Knox. When a payment is
registered in the system information on the payment is sent by email to one of For
Knox’s service providers. The invoice is next printed and sent by mail to the receiver.
The due date is clearly specified, but it is not evident when payments must have
reached the bank account of Company B. Received payments are directly
transferred to the bank account of Company B.
Company B do not charge any penalty fees or interest. CFO B believes that
the use of such practices would damage customer relations, especially when
considering the relatively small amounts of money in question.

4,5,3 Dunning

CFO B does recognise that there are some customers that always are delayed with
payments, but this is not lasting in the long run. In situations when payments of
customers are not received, an automatic reminder letter is printed and mailed directly by
their bank SEB. This usually solves the problem instantly and the payment is made within
a couple of days. In fact, the whole accounts receivable ledger is managed by SEB. The
reminders are signed by SEB instead of Company B, which according to CFO B make
customers take late payment more seriously. It also saves Company B a lot of
administrative e ort. If the invoice does not get paid after the first reminder another
reminder is sent to the customer that states the invoice is to be sent for debt collection.
This is a rare situation and CFO B can only recall it has happened once.
It is stated on the invoice that they do charge penalty interest, but in reality CFO
B reveals that this is not the case. He believes that it would just take unnecessary time
and might damage customer relations for a small amount of money.

4,6 Summary of Empirical Findings

The purpose of this section has been to present the data gathered through the
qualitative interviews of this study. The findings indicate the following major equalities
and inequalities regarding cash management practices in the two firms:

• The key individuals in each firm have di erent backgrounds. CEO A and CFO A
have formal education in business, while CFO B is educated in the field of the
core business of the company. CFO A works full-time with economic
administration while CFO B have other responsibilities as well.

26
 • Both companies have a rough goal of setting the liquidity level equal to one
month’s cash outflows. When financing deficits Company A relies on large cash
reserves, but Company B relies on check credit and their factoring service.
Company A actively seeks to invest surplus cash at a high return. Company B,
on the other hand, neglects this opportunity to earn higher return.

• Company A actively rises short-term liquidity forecasts. However, Company B

does not see any need of forecasting due to the long-run net positive cash flow
of their business. None of the firms rise long-term forecasts.

• At the proposal stage both firms are unable to a ect the agreement terms with
customers to any greater extent, because industry standards and/or power
imbalances limit their room for action. 50 per cent of the customers of Company A
have a credit time of net 45 days. The rest have net 30 days with some exceptions.
Company B applies a standard credit time of net 30 days with some exceptions.

• Timesheets are collected on a weekly basis at Company A, while Company B

collects them every day.

• Invoicing is processed quite frequently at Company A, but a majority of the

invoices are sent by the end of the month. Company B invoices once a month
even if it would be possible to process invoices earlier.

• None of the firms utilise reminder fees or penalty interest due to the possible
negative e ects on business relations.

Next, a comparison between the theoretical framework and the empirical findings will
be presented and analysed.

5 Analysis

5,1 Liquidity

5.1.1 Why Do Companies Hold Cash?

According to Berk and DeMarzo (2011) there are three motives for firms to hold cash:
The transactions balance, the precautionary balance and the compensating balance.
CEO A and CFO B state that they want the liquidity bu er to cover the daily needs. This
corresponds to the first motive for holding cash - the transaction balance. CEO A states
that the liquidity bu er should cover the daily outflows, but also unforeseen outflows. CFO
B explains that their liquidity bu er should cover the daily needs, but also fluctuations in
the cash flows. The motive for holding cash is firstly the transactions

27
balance, but also to cover unforeseen and fluctuating cash flows. This corresponds
to the second motive for holding cash - the precautionary balance.
Both of the companies support the two first motives of holding cash, but do
not really mention the third compensating balance in the motivation of liquidity level.
This has a logical explanation since none of the companies have any bank loans and
the compensating balance therefore has no significant impact on the liquidity level.
One important observation is that both CEO A and CFO B have made an estimation
of what they think is an appropriate level according to them and have not really tried
to investigate if it is reasonable in other senses.

5.1.2 How Much Cash Do Companies Hold?

Holding too much cash has an opportunity cost but on the other hand, holding too
little cash might also lead to costs and default (Blomstrand and K¨allstr¨om, 1991).
Company A has never been in a situation of financial distress, or needed to borrow
money to cover expenses other than in the start-up period. CEO A prefer to hold
what in theory is defined as ”too much” cash for cost minimising, with the motivation
of avoiding risk. Company B has not needed to use any kind of short-term financing
the last year, since they have decided to keep a high liquidity bu er.
The issue is to find a feasible liquidity level, to weigh the cost of a high and
low liquidity (Blomstrand and K¨allstr¨om, 1991). This di ers from the both companies
that do not weigh the costs of holding “too much” cash and holding “too little” cash.
The CEOs have instead made an approximation of what they think is an appropriate
to avoid risk. Neither Company A nor Company B apply formal methods when
deciding an appropriate liquidity level even if they both make some kind of conscious
choice. According to Anvari and Gopal’s study (1983) 26 per cent apply formal
methods in their liquidity level decision. This shows that Company A and Company B
are no exceptions.
One big di erence between the companies is that Company A places the cash
exceeding their aimed liquidity level on another depot account where the money
potentially receives higher return on the bond and stock market. Company B on the other
hand has not been working actively with investing their excess cash, since they have not
until now felt that they had that amount of cash to consider it necessary. According to
Dolfe and Koritz (1999) the aim for a company should be to place surpluses in financial
instruments with higher return than bank accounts. This is something that agrees with
how company A acts, but is not applicable to Company B. The most common type of
investment is to place money in bank accounts, and most companies only use one bank
according to Anvari and Gopal’s study (1983). This agrees with how Company B acts.
They only use one bank (SEB) and they keep all their excess cash in one bank account.

28
Company A also uses one bank, but di ers in the sense of cash placement. The cash
that is not paid as dividends or reinvested in business operations is placed on the
stock and bond markets. Cooley and Pullen (1979) revealed that only eight per cent
of the respondents in their study invested in the stock market.
CFO A does not think that a zero balance is beneficial for them. The forecast
would in that case need to be very precise and the cash flows stable. He does not
think that the current level is optimal and probably should be lower weighing the
advantages and disadvantages with a lower liquidity level. This supports Dolfe and
Koritz (1999) who state that the issue is to weigh the extra e ort required with the
cost minimisation it leads to. CFO B states that he thinks that a close to zero balance
could be feasible for them since their cash flows are pretty stable and they do have
factoring and check credit solutions if the cash balance would be negative. The di
erent approaches that the companies have support Dolfe and Kortitz’s (1999) theory
that some companies benefit from a close to zero balance while others do not.

5,2 Liquidity Forecasting

5.2.1 Do Organisations Establish Liquidity Forecasts?

Liquidity forecasting is an important tool in order to manage cash e ectively and to

increase the net interest income (Larsson and Hammarlund, 2005). Company A
works intensively with short-term forecasting while Company B does not work with
forecasting at all. CFO B states that liquidity planning has not been a prioritised
matter and focus has been on the core operation. He also states that since the
liquidity has not been high, liquidity forecasting has not been necessary. If the
company would start to work more efficiently with cash management, CFO B admits
that liquidity forecasting would be necessary, similar to what Larsson and
Hammarlund (2005) express. The awareness of these benefits of forecasting exists
in both companies, but only Company A works actively with forecasting. Because of
this, the following analysis will be connected to Company A.
Short-term liquidity forecasting is important to be able to handle fluctuations in the
demand of cash. The short-term forecasting should be made monthly, about one year
ahead in order to ensure that sufficient funds always are available (Berk and DeMarzo,
2011). This is consistent with how Company A handles their short-term liquidity planning.
CFO A compiles a liquidity forecast describing the in- and outflows of cash over the
coming 20-30 days and communicates with CEO A to make changes in the liquidity
balance accordingly. The focus in the liquidity forecast should be on significant cash
flows that a ect the liquidity situation and not on the insignificant flows (Dolfe and Koritz,
1999). This corresponds to what CFO A states, that the focus should be on the most
important flows and that a more detailed forecast would not be worth the

29
e ort. The purpose of the forecast is to approximately see what the liquidity situation
will be like at the end of the forecast period. The forecast reflects the outcome to an
appropriate extent, which is a fact that Dolfe and Koritz (1999) emphasise.

5.2.2 The Timing of Cash Flows

Another liquidity issue is the timing of cash flows, which usually is not a big issue in
more established firms since the inflows usually exceed the outflows (Blomstrand
and K¨allstr¨om, 1991). This is the case in both the companies. CFO A states that he
does not try to match in- and outflows since they have the liquidity bu er to cover the
situation of the outflows occurring before the inflows, and CFO B says that neither
does he, because their cash flows exceed the inflows. The liquidity forecast can lead
to planning the outflows better. Some purchases should maybe be postponed to
balance the cash flows and enable a lower liquidity level (Larsson and Hammarlund,
2005). Neither Company A nor Company B think that this is necessary. They both
have the bu er to cover all the outflows if all the inflows would come at the end of the
month and the outflows earlier.

5.2.3 Forecasting Short-Term Financing

Company B uses their check credit with relatively high interest cost and in some cases
they also use the factoring service o ered by their bank. If they knew when and how
much cash they would need, they could probably get better conditions from the bank and
potentially get rid of unnecessary cost for factoring and check credit. Most companies
need short-term financing at some point, and the better this deficit is predicted, the better
solutions and conditions they could get (Larsson and Hammarlund, 2005). What seems
like an easy and fast solution to situations of financial stress in terms of guaranteed credit
and factoring services, potentially leads to unnecessary expenditures that could be
removed through better forecasting. The issue is to weigh the cost of this expensive
“quick fix” compared with the cost of detailed forecasting processes.
Dolfe and Koritz (1999) point out the beneficial results of active liquidity
forecasting. Firstly, e ective bank management makes it possible to compare
conditions between possible accounts. Secondly, the result in the improvement of
interest through knowing how much that will be needed to borrowed and when. The
situation of needing short-term financing has not been applicable to Company A for a
long time since it is an established, healthy firm in a phase of slow expansion.
Company B on the other hand has been in this situation and may need to finance
future expansion. Proper forecasting could definitely benefit their future need of cash
in a phase of expansion as Dolfe and Koritz (1999) points out.

30
5.2.4 Long-Term Financing

Long-term forecasts running over 3-5 years should be provided to the management
for them to make decisions regarding the size of liquidity reserves, capital structure
strategy and investment decisions (Dolfe and Koritz, 1999). This does not
correspond to how Company A and Company B argue. Long-term forecasting is
something that CFO A does not think is of high priority. He states that cash flows with
a time horizon of a couple of years would not a ect how they handle the cash flows
today. New projects occur and others are finished, which means that cash flows
would be too difficult to predict so far ahead. He does believe that it is important to
identify major outflows and prepare for them, but since the company is pretty small
he does not think that it is necessary with forecasts. The companies do believe that
some kind of long-term planning is beneficial, but maybe not to the extent that Dolfe
and Koritz (1999) pose. Company B does not establish any long-term forecasts
either, but they do engage in some planning of future projects and cash flows.

5.2.5 How Important Is Forecasting?

The beneficial results of active liquidity forecasting are firstly the efficient bank
management which makes a comparison of the conditions between accounts possible.
Secondly, the return on the investment of temporary cash surpluses and the lower
interest of loans in temporary deficit. This e ect is through knowing which amounts that
will be borrowed in the future and knowing how big the surpluses will be. Thereby you
can get better conditions (Dolfe and Koritz, 1999). This corresponds to what CFO A
states, but he does believe that the forecasting should not be overworked, but to some
extent the forecast is important to establish. CFO B has not until now felt that forecasting
is a prioritised task, other processes in the company are more important but he does
realise that an improved liquidity planning could improve their situation.
Both companies are considered as small and the Anvari and Gopal (1983)
questionnaire shows that the use of forecasting is far more used among larger organisations.
The studies of Cooley and Pullen (1979) and Grablowsky (1978) show that approximately 30
per cent of the investigated firms use forecasting. Company B is no exception.
CFO B emphasises that liquidity and forecasting have not been matters of
priority, because the company has generated positive cash flows since 2010. CFO B
believes that the company is arriving at a stage where cash management is
becoming more important, which shows that a company’s development is connected
to the concerns about the level of liquidity. The company is starting to realise Dolfe
and Koritz (1999) emphasis on the importance of liquidity forecasting.

31
5,3 Inward Cash Flows

5.3.1 From Proposal to Order and Delivery

Theory by authors such as Dolfe and Koritz (1999) and Hedman (1991) accentuate
the importance of giving careful consideration to the proposal stage due to its overall
impact on cash flows. During this stage agreements are formed and terms, which
constitute the frame of a deal, are determined. Company A tries to look after their
interests by a ecting agreement terms such as price and credit terms whenever
possible. However, because their largest customer is a major manufacturer in the
automobile industry their abilities to influence the terms of an agreement are limited.
As Hedman (1991) indicates, suppliers in the automobile industry are often under
immense pressure and have no choice but to submit themselves to the stipulation of
their clients. Company A must therefore accept credit terms of net 45 days towards
their largest customer. For some new projects the credit term is even as long as net
90 days. In addition, this customer corresponds to approximately 50 per cent of the
business. This involves both high risk taking and the loss of interest gains. Dolfe and
Koritz (1999) suggest that a higher price could compensate for the increased risk and
longer credit term, but CEO A has never considered demanding this kind of
compensation. Neither has CFO B, but unlike Company A, Company B sometimes
demands split payments to generate a more even inflow of cash. These observations
suggest a possibility to improve cash management practices in both companies.
According to CEO A, the terms of an agreement are more open to negotiation
in the case of other customers. Standardised contracts with credit terms of net 30
days are used, but longer credit terms are accepted in special cases. Company B
also uses standardised contracts with credit terms of net 30 days. This is often a
demand from the consulting brokers. According to CFO B, the possibility to influence
the terms of an agreement is greater when negotiating terms with customers directly,
but similar contracts are usually used. CFO B tries to keep credit terms short. He
only accepts longer credit terms in special cases. One such case when net 90 days
were accepted did not involve any large amounts of money. CFO B justifies this case
by referring to the low financial risk involved. Surprisingly, he also refers to the fact
that the consultant who is assigned to this customer enjoys working there.
An important step before signing an agreement is to investigating the credit-
worthiness of customers to minimise credit risk. In fact, this is not only true for new
customers but also for existing ones (Dolfe and Koritz, 1999). Company A usually does
this with new, small customers, but not for existing ones. Most of their customers are
large companies whom they trust. Company B never checks the creditworthiness of their
customers. The reason is that CFO B to a great extent trusts their larger business
partners. He is doing business with small unknown firms too, even when their credit-

32
worthiness turn out to be bad. This is normal for this group of firms. He does not want
to miss out on potential future customers and it is usually small amounts of money
involved that outweigh the risk (CFO B). Even though Dolfe and Koritz (1999) state
that it is important to investigate the creditworthiness of customers, Company B
believes that in some cases potential customers could be lost. Furthermore, they
consider the risk of default to be low.
From the data presented above, the observation can be made that both
Company A and B try to influence the agreement process to protect their own
interests. However, this seems to be done intuitively, rather than being based on
some kind of financial strategy or cash management techniques. This is coherent
with the findings of Grablowsky (1978) which state that managers base decisions on
ad hoc opinions rather than soundly conceived cash management techniques. Their
ability to do this is however partly limited, mainly depending on the size and influence
of the other contracting party. This is entirely in line with Hedman (1991) who points
out that small firms may be forced to adjust themselves to larger clients. Even when
customers demand terms which are less favourable, the companies in this study
seem to accept these if they know the business relation is likely to guarantee them a
stable inflow of cash in the long-run. The fact that Company B accepts longer credit
terms than usual, because a consultant enjoys working for a specific client, also
reveals that the decision making of small firms is partly irrational. Thus, there is a
personal dimension a ecting the decision making of managers.
Managers use standardised contracts to simplify the agreement process with
customers. In other words, time and resources are scarce to small firms and the
attention of managers is needed for other tasks as well. This is in line with the
findings of Cooley and Pullen (1979).
Finally, creditworthiness seems to be handled di erently by the two firms of
this study. While Company A was very careful, Company B largely trusted their
business partners. Company B also did not mind taking small risks in order to build
business relations.

5.3.2 Invoice

When invoicing, the primary goal is to send the invoice as early as possible in order
to receive payments as quickly as possible. Preferably, an invoice should be sent
when shipping a good or directly after a service has been executed. If invoicing is
done efficiently the liquidity of the firm will be improved (Dolfe and Koritz, 1999).
Before invoices can be dispatched the sender must have relevant invoicing data. In
consulting companies, invoices are based on the actual work performed by the employees. At
Company A consultants report work time on a weekly basis, but timesheets

33
and receipts required for invoicing are occasionally turned in too late, which delays the
dispatch of invoices. CFO A believes they could do better and the key to avoiding this
kind of situation, he thinks, is to make employees more aware of the importance of swift
and correct reporting. Company A has ongoing problems with invoice errors. CFO A
estimates that about five per cent of the invoices are returned due to errors. When errors
occur it is usually about small specification problems or because of faulty order numbers.
Company B is better at handling time reporting and their consultants report at the end of
each working day via their customised system. CFO B believes this routine is a one
reason why complaints by customers regarding invoices are very uncommon.
These findings suggest that the companies in the study are well aware of the
importance of a well functioning system for reporting consulting hours. This may
decrease the risk of experiencing unnecessary invoice errors (Dolfe and Koritz,
1999). However, there is room for improvement at Company A by more frequent time
reporting. As Dolfe and Koritz (1999) state, this would allow them to dispatch
invoices earlier and to avoid unnecessary delays caused by faulty invoice data.
Company A has also experienced problems with receiving necessary
information from their largest customer. In the most extreme cases this has extended
the original credit terms of net 45 days by several weeks. According to CEO A, the
blame is entirely on the customer and the issue has been raised for discussion. By
finding ways to avoid this kind of situation Company A can improve cash flows and
liquidity (Dolfe and Koritz, 1999).
The invoices of both Company A and B contain all necessary information for
customers being able to execute payments. However, it is not specified when
payments must have reached the bank accounts of the companies. This is against
the recommendation of Dolfe and Kortiz (1999). If they did, it is likely that payments
could be received earlier and thus increase profitability (Dolfe and Kortiz, 1999).

When Are Invoices Sent? According to the recommendation of Dolfe and Koritz (1999), it
is advisable that companies have more than one individual who is familiar with the
invoicing procedures. This would reduce the risk of not being able to dispatch invoices.
At both firms, CFO A and CFO B are the only individuals responsible for invoicing. In
case they are absent invoicing is likely to be delayed. Company B, however, is currently
training additional sta to be able to stand in if necessary.
Dolfe and Koritz (1999) suggest that invoices be sent on a daily basis to increase
the speed of cash flows. However, none of the companies act accordingly. Company A
tries to invoice smaller projects as soon as they have been finished, but since working
hours only are reported once a week this usually takes one week at best. Other projects
with their largest customer are invoiced once a month according to terms Company A
has no other choice but to accept. CFO A admits that many invoices are delayed,

34
but he does not seem particularly bothered if invoices are dispatched a couple of
days late. Company B always dispatches invoices at one occasion at the end of each
month, regardless of when a project is finished. According to CFO B, larger customer
often request this practice. In case of smaller customers, there is more room for
negotiating credit terms. If invoices were sent directly after finishing a project,
Company B could receive payment earlier and earn interest in accordance with Dolfe
and Koritz’s (1999) recommendation. However, CFO B justifies this practice by
referring to administrative advantages. It saves him a lot of time making him able to
spend more energy on core business activities. He believes he is more valuable to
the firm when he devotes himself to core business activities. CFO B also prefers this
monthly routine, since it gives him good overview of the current situation.
In sum, the advice by Dolfe and Koritz (1999) to invoice on a daily basis is not
followed by the companies in this study. This is mainly due to time constraints, lack
of resources or larger customers stipulating other procedures. Cooley and Pullen
(1979) also found that the lack of time and resources are two fundamental reasons
why small firms do not apply cash management practices.

How Are Invoices Sent? In order for customers to be able to pay they must receive
the invoice as soon as possible (Dolfe and Koritz, 1999). Company A sends invoices
by ordinary mail. A speedier option would be to use electronic billing. CFO A says
that electronic billing could be implemented rather easily, but he believes the impact
on inflows of cash would be minor. Company B also sends invoices by mail through
the service provided by SEB. This service simplifies the administrative tasks
executed by CFO B and it leaves him more time for other business activities. Again,
this indicates that time and resources are two important variables a ecting the
refinement of cash management routines. CFO B finds this service well worth its
price and he would not be interested in electronic billing even if it was faster.

How are Payments Made? Dolfe and Koritz (1999) prescribe that companies should
invest surplus cash at highest possible interest. This implies that companies should try to
earn interest on funds in general. Therefore, money should directly upon payment always
be transferred to interest bearing accounts or be used for more profitable investments.
Both Company A and B follow the recommendation of Dolfe and Koritz (1999) and
transfer all incoming payments to their interest bearing business accounts directly.

5.3.3 Dunning

Sometimes customers fail to pay on time in accordance with the agreed terms. Reminder fees
and penalty interest are two common means for exerting pressure on customers who do not
pay. Reminder letters can be sent to customers who do not repay their debt in

35
time. Reminders can also be made by telephone, which may be appropriate if the
total number of invoices is small (Dolfe and Koritz, 1999).
The customers of both companies usually make their payments when they
are due, but a small portion of the payments are always delayed. There is a risk of
hurting customer relations if reminder fees and penalty interest are used. It is not
unusual that the sales force discourage the use of penalty interest for this reason
(Dolfe and Koritz, 1999). In accordance with this, CFO A does not charge reminder
fees or use penalty interest. These are included as a part of the payment terms, but
CFO A believes that the use of fees like these would damage customer relations and
it would not be worth the extra administrative e ort. This is similar to what Dolfe and
Koritz (1999) state. Neither does Company B charge reminder fees or penalty
interest. CFO B is of the same opinion as CFO A. The use of such practices would
damage customer relations and is not worth the e ort, especially when considering
the relatively small amount of money in question.
One conclusion that can be drawn from this discussion is that managers give
priority to business relations over the potential gain of earning money by aggressive
dunning practices. This is in line with Dolfe and Koritz (1999) theory. Both CFO A and
CFO B do not consider payments arriving a couple of days late a big problem. This
laissez faire attitude may also be explained by the fact that di erent companies calculate
the actual due date di erently. As Dolfe and Koritz (1999) state it is not uncommon that
companies add a couple of days to the due date to compensate for postal services.
Simply calling customers whose payments are overdue is usually the easiest way of
tackling the problem. In sum, both Company A and B have relatively few problems with
overdue payments and when these problems do occur they are preliminary solved on a
friendly basis rather than by using aggressive dunning practices.

6 Conclusion

6,1 Results

• How do small consulting firms apply cash management practices in their business?

The companies in the study apply cash management techniques in their liquidity work
and use liquidity forecasting to some extent. They do not use any specific cash
management tools. The liquidity level is rather based on arbitrary estimates. The motives
of holding cash according to Berk and DeMarzo (2011), agree with the motives the
companies have when setting their liquidity level, but it is not a conscious choice. When
deciding how much cash to hold both companies prefer to hold more than necessary
according to cash management principles (Blomstrand and K¨allstr¨om, 1991). CFO A
does not think that a close to zero balance is realistic but CFO B believes that a close

36
to zero balance could be reasonable.
The aim for an organisation should be to place excess cash where the return
is higher than on the bank account. This is something that Company A adopts but not
Company B. Liquidity forecasts are established in Company A, but not in Company
B. Company A establishes short-term forecasts corresponding to cash management
policies. Neither of the companies establish long-term forecasts as recommended by
theory, but both companies have some idea of cash flows in the long run. Lastly, the
companies do not work actively with timing of inflows and outflows of cash.
It is important that companies have efficient administrative routines in order to
improve the inflow of cash (Dolfe and Kortiz, 1999). The analysis of the companies based
on the credit arrow reveals that their routines are sophisticated in certain areas, while
some areas are neglected. There are some areas where they could improve their
routines for the cash inflows. Both of the firms in the study try to protect their interests by
negotiating the agreement terms with customers when possible. Both companies also
dispatch invoices on a monthly basis. Company A occasionally invoices smaller projects
upon completion. The design of the invoices is clear and only one individual is
responsible for invoicing at both companies. As far as reminder fees and penalty interest
are concerned, the study shows that neither of them are used.

• What is the underlying reasoning to why managers of small consulting firms

apply cash management the way they do?

When deciding liquidity level, the CFOs make an estimation of what they think is an
appropriate level. The reason they do this is because it is convenient and they think
that it is reasonable. They base their liquidity level on one month of outflows to avoid
the risk of not being able to pay their invoices and covering the daily need for cash.
Avoiding the risk of financial distress outweighs the potential loss of return on
placements. They would rather have what might be a too large bu er and be sure that
they always have cash available.
In Company A, the cash exceeding the liquidity level is placed in the stock
and the bond markets in order to get higher return on the money. CEO A wants the
resources to be placed where the return is highest, but at the same time he wants to
avoid risk. CFO B on the other hand does not give priority to placing cash where the
return is higher. He does not find this necessary. He does think that since their cash
bu er is getting larger every month, it would be reasonable to place excess cash
better, but still he would like to avoid too much risk.
Both CEO A and CFO A appreciate the value of short-term liquidity forecasting
and utilise this cash management technique. They believe it improves the financial
situation of the company. Furthermore, they believe that long-term cash flows are too
difficult to forecast in order to justify the use of long-term cash forecasting practices.

37
It is simply not worth the e ort. The reason why CFO B does not use any forecasting
techniques is that he considers their liquidity bu er large enough to make liquidity
planning unnecessary. He does not consider the potential gains of investment
alternatives other than their bank account.
The findings of this study also indicate that lack of time and resources is an
important factor why companies do not pay more attention to cash management
practices. This is in line with the findings of previous studies by Cooley and Pullen (1979)
and Grablowsky (1978). For instance, this is reflected in CFO B preferring invoicing on a
monthly basis for reasons of convenience. He also considered engaging in core business
activities to be a more valuable contribution to the firm. In other words, financial
managers of small firms are likely to have other responsibilities as well.
Another finding explaining why managers do not utilise cash management
practices is that business relations are often given priority over the (in their opinion)
small gains of more sophisticated procedures. This is why reminder fees and penalty
interest in general are not used, and unfavourable terms may also be accepted if the
business relation is likely to generate stable and long-run profits.

• Is there room for improving current practices in accordance with cash

management theory?

The companies studied have what theoretically is a “too” high liquidity. If they could lower
their liquidity they could get higher return on the money exceeding their bu er. If they
refined their techniques of setting the liquidity level they could get a more feasible level.
However, this may increase the risk of experiencing liquidity shortages.
Company A already places cash in a depot account where the return is
potentially higher and they could benefit from raising the balance on this account.
Company B on the other hand does not have another account and would benefit
from placing surpluses in financial instruments with higher return than bank accounts.
Liquidity forecasting could definitely benefit Company B that does not work
with this at all today. This is also connected to the liquidity level. If they could predict
their cash flows they could also estimate an appropriate liquidity level. Both
companies could benefit from a more long-term forecasting through improving
management decisions. The issue with forecasting is to weigh the e ort it takes to
establish a correct forecast against the benefits it brings.
In accordance with Cooley and Pullen (1979), the empirical findings of this
study suggest there is room for improving cash management practices by relatively
simple measures. The companies should try to invoice customers more frequently,
especially Company B regarding larger payments. Company A should try to improve
time reporting routines to avoid extended credit terms. Both companies should also
specify credit terms as the date when payments should be at their accounts.

38
 We have only investigated two small firms and cannot draw any general
conclusions from our findings. What we can do is to identify areas where companies
similar to those of this study also may experience cash management issues that are
possible to solve. The study has identified some similarities between the companies,
which indicate there is a pattern of how small consulting firms behave and why. In order
to draw more general conclusions a larger amount of companies must be investigated.

6,2 Reflections

In this section we would like to share our thoughts on some observations we have
made during the work process.

Liquidity The liquidity level in both companies is high. This is something that both
theory and the respondents support. However, the issue to consider is if it is too high.
Theoretically the level should be lower, but the lower the liquidity the higher the risk.
It is hard to estimate how high the risk is compared with the costs. As long as market
conditions are stable and the customers are stable the risk is low, but these
conditions di er between organisations and are usually not stable. In the case of
Company A they are very dependent on one large company, which may increase the
risk. If this customer suddenly would be unable to pay their invoices it would
dramatically a ect the cash inflows of the company. The market forces have also
revealed, especially after the financial crisis of 2008, that markets are unstable and
extremely volatile. These forces influence organisations to hold more cash as a bu er
to shield from downturns. The impression is also that small companies are more risk
averse than larger organisations. In sum, the liquidity level is connected to risk, and
the risk is di erent in industries and organisations.
The reason for companies to invest surplus cash exceeding the liquidity level is
that this enables them to increase the return compared to the return of their bank
account. The larger the di erence between the return on the bank account and financial
instruments, the larger are the incentives to relocate excess cash. This di erence is small
today and interest rates are low. Consequently, this might discourage companies to
make the extra e ort of relocating cash surpluses. On the other hand, if the interest level
rises, this could be a large raise in the rate of return on their investments.

Forecasting Forecasting is time-consuming and it takes a lot of e ort, this needs to be

compensated with the benefits it brings. The cash flows of small consulting firms seem to
be unsecure and volatile. This makes the forecasting process harder and more sensitive.
Company A has few large customers that a ect the cash flows. This means that one
single delayed payment by a customer may derange the whole forecast. On the other
hand, the planning of cash flows helps small companies to foresee these kinds of

39
issues. A delayed payment could have severe e ects on the liquidity of a small
company. Consulting companies often o er projects that may be more difficult to
predict than the sales of a manufacturing company. The service might change or the
project is simply aborted for some reason. A project seems to be more risky and
subject to change, compared to selling goods.

Knowledge The level of awareness of the potential benefits of cash management

techniques is obviously dependent on knowledge. The knowledge level is very di
erent in the two companies of this study. Managers at Company A have knowledge
of business and economics, while CFO B lacks formal education in this area. This of
course a ects the decision-making process and how cash management practices are
applied. In sum, the prerequisites for efficient cash management procedures strongly
di er between Company A and B.

Ownership Another reflection is concerned with how ownership structure a ects the
decision-making in small firms. Small companies are often owned and run by a small
number of people. This implies they have large possibilities to control the business,
without taking a larger circle of owners into consideration. In that case the primary
goal of an individual in a decision making positions is not necessarily to maximise the
return of the shareholders. Owners maybe give higher priority to their own interests,
rather than to what strictly economically would be best for the company. That small
firms do not utilise cash management techniques may then be explained by the
simple fact that it is not in the interest of managers.

6,3 Suggestions for Further Research

Previous quantitative studies of cash management practices of small firms are dated.
The most recent studies we were able to find are those made by Grablowsky (1978),
Cooley and Pullen (1979), and Anvari and Gopal (1983). Much has happened since
then. The development of IT-technology has for instance resulted in many new
possibilities for companies to improve cash management practices. Practically any
small firm can nowadays easily utilise cash management and financial services
provided by banks and other companies in the private sector. Therefore, a new
quantitative study on cash management practices of small firms could be made by
considering these new alternatives to efficient and easy cash management. Such a
study could preferably also be made in a Swedish or European context.
A second suggestion for further research is to repeat this qualitative study by
adding more companies to the research sample. The issue at focus would in that case be
to get a broader understanding of why managers behave the way they do in regards to
cash management. This could for instance be done by including theory explaining

40
the decision-making process of small firm business managers from a managerial
point of view.

41
References

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Appendix A - Interview Template
Background
• When was the company founded?

• What is the core business of the company?

• How many employees does the company have today?

• What was your turnover last year?

• How is the organisation structured?

• What is the ownership structure?

• Who are the primary customers of the company? How many customers do you
have?

An Introduction to Cash Management

• What does cash management mean to you and the company?

• Do you believe that cash management is an important tool for a well-functioning

organisation?

• Does the company actively work with cash management? Do you believe there
is room for improvement?

• Is the cash management work connected to a general financial strategy?

The Inward Cash Flow Process

Agreement Process
• Describe how agreements are formed with customers.

• Is there room for negotiating agreement terms with customers?

• Are there ways to improve the room for negotiations with customers?

• Are the terms standardised or do they di er between customers?

Terms of Payment
• How are terms of payments negotiated?

• Which payment terms are applied? E.g. how long credit times are used? How is
the due date negotiated?

• Do you demand higher price to compensate for extended credit time?

• Would split payment be an option?

• How is credit risk towards customer handled? Do you check the

creditworthiness of the organisations current and new customers? How?

• Are customer payment patterns analysed for the companies’ most important
customers? Do you follow up the payment pattern?

44
 • Are cash discounts applied?

• Which payment method is used? E.g. bank checking.

• How is penalty interest negotiated?

• How are reminder fees negotiated?

Terms of Delivery
• Are delivery terms and delivery method stated in detail?

Order
• Are orders checked to see if they correspond to the initial proposal?

Invoicing
• What are your invoice routines? What is the procedure from timesheets to sent
invoice?

• Who is responsible for the invoice handling?

• Is there always someone who is responsible for the invoicing? (e.g. when
someone is ill)

• When and how often do you send invoices?

• How are finished services reported? What are the routines?

• How are invoices distributed? Are e-invoices used?

• What does an invoice look like?

• What does a credit note look like?

• Do invoice errors occur? How often?

• What are the underlying reasons why errors occur?

• How many credit notes are sent? Which are the main reasons why they are
being sent?

• What is the average utilised credit time?

• How many invoices have been sent 2009, 2010, 2011?

• How are they distributed throughout the year? Are there any seasonal patterns?

Dunning activities
• How are claims handled? What are the routines?

• What are your reminder routines?

• Do you apply penalty interest on delayed invoices?

• How often do you actually charge penalty interest when it is possible?

• Are there routines on how to handle dunning?

45
Managing Liquidity
Liquidity Level
• Have you established an aim of the liquidity level? Why is this level appropriate
for you? On what ground is it established?

• What should the liquidity cover?

• How do you act to keep in course with this aim?

• How do you handle cash surpluses? Short-term placing?

• How do you handle cash deficits? Short-term financing?

• Theoretically, a zero balance is cost efficient. What is your opinion? Is it

realistic to hold no cash?

• Do you consider holding too much cash as inefficient?

• Which bank do you use and what services do they o er?

• Which accounts do you use and what are the returns of these accounts? To
which account do payments arrive?

• Low market interests currently make it favourable to borrow at low cost and less
favourable to hold cash since the return is relatively low. Does this fact a ect
your liquidity level?

• How do you place your cash in the long term?

Liquidity Forecasting
• How do you work with liquidity planning?

• Do you establish liquidity forecasts? How are they designed and what do they
contain? Do you forecast in the long and short terms?

• Do you consider your forecasting e ective and do the forecasts correspond to

the actual outcome?

• Do you try to match in- and outflows or do cash flows occur randomly?

• Is the timing of in- and outflows an issue? Are they volatile?

• Do you think a more efficient liquidity forecasting could benefit your cash flow?

46