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Cash Forecasting at CEVA Treasury
Ernst de Kuiper Group Treasurer & EVP Finance
Friday, June 4th 2010
Ernst de Kuiper
Group Treasurer & EVP Finance
CEVA Logistics
Ernst de Kuiper has been the Group Treasurer of CEVA Logistics since 2007
and held different positions within TNT Logistics since 2001, such as Chief
Financial Officer for the Benelux and Central and Eastern Europe. From 1998
to 2001, Mr. de Kuiper was employed by Ahold as Operational Controller
Europe. Prior to this, he was employed by Procter and Gamble for seven
years, being the Associate Director of Finance his last role. Mr. de Kuiper
received his Master in Business Economy/Finance in 1990 from the University
of Groningen.
Agenda
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CEVA Logistics – a short introduction
Role of the Treasury department
Challenges of Treasury
13 week forecast
Accuracy test
What did we learn?
What’s next?
Cash Forecasting at CEVA Treasury
17 July 2015
CEVA Logistics – a short introduction
Northern Europe
Americas
Revenue: 29%
Employees: 41%
Asia Pacific
Revenue: 25%
Employees: 27%
Southern
Europe, Middle
East & Africa
Revenue: 23%
Employees: 20%
Revenue: 23%
Employees: 12%
•
Note:
The map above only reflects countries in which CEVA operates facilities. CEVA also operates in many other countries together with local agents.
Headquartered in the Netherlands, CEVA is the fourth largest integrated supply chain logistics provider in the world
with 46,000 employees
•
Global capabilities include approximately 1,200 locations in over 170 countries serving over 15,000 customers
worldwide
•
CEVA provides end-to-end supply chain solutions for Contract Logistics, Freight Management, Brokerage and other
logistics services
•
Fiscal year 2009 revenues and EBITDA of €5.5 billion and €343 million, respectively
Vision
CEVA will be the most admired company in the supply chain
industry exemplifying Unity, Growth and Excellence
Mission
CEVA – making business flow
cash
CEVA Logistics – a short introduction
• 2 businesses:
- Contract Logistics: Long term contracts, logistic solutions for
factories and distribution for trade organizations
- Freight Management: Generally ad hoc buying and selling
freight capacity.
• Young organization:
- CEVA was formed after the merger of TNT logistics and EGL
Eagle Global Logistics in August 2007
• Private Equity owned firm
- Leveraged organization
- Cash is not king but everything
• Dynamic company culture
- ‘Can do’ attitude
- Three key values: Unity, Growth and Excellence
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Cash Forecasting at CEVA Treasury
17 July 2015
Challenges of Treasury
• Hands-on department & close to the business
• Initial Focus on Working Capital:
- Reducing days outstanding of AR, overdue
• Day to day feel of the cash position, cash pools, local cash, trapped cash and trades
• Weekly 13 week outlook on cash (13 week cash forecast)
• Hedging FX exposure for a global company, mostly P&L, little or none on Balance
Sheet
• Getting cash out of restricted countries such as Brazil, India and China
- By dividend policy
- By steering intercompany payments (hold or speed up)
- By setting in-country cash pools
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Cash Forecasting at CEVA Treasury
17 July 2015
13 week forecast
• Key characterisics:
- 13 weeks ahead
- Rolling forecast
- Spreadsheet driven
- Use for financing and ‘heartbeat’ of the business
- Bottom up
- Separation of cash item lines such as CapEx, Interco, Tax
and AP and AR
• Bumps on the road:
- Reconciliation with budget
- Fading/timing issues, especially AR and FM business
- Separating W/C movements from EBITDA (you can’t)
- Intercompany payments (consolidation)
- Tight schedule, information delay (CF schedule of 4
working days including con-calls on accuracy)
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Cash Forecasting at CEVA Treasury
17 July 2015
13 week forecast – Accounts Receivable
Opening Accounts Receivable
Forecast Sales (Gross)
Collections (Gross)
- Opening AR
- Forecast Sales (Current Mnth)
- Forecast Sales (+30 days)
- Forecast Sales (+60 days)
Week 1
200,000
MONTH 1
Week 2
Week 3
Week 4
Week 1
245,000
200,000
(30,000)
(5,000)
(5,000)
(5,000)
(60,000)
(2,000)
Closing Accounts Receivable
(40,000)
(8,000)
(25,000)
(6,250)
(30,000)
245,000
Month 0
31
200,000
175,000
Days
Closing Accounts Receivable
Sales (Actual/Forecast)
Accounts Receivable Days
[w1] Cash Collections (Forecast Sales)
Current Mnth +30 days
Customer Payment Profile
10%
60%
wk 1
25%
wk 2
25%
Month 2
31
285,000
250,000
Month 3
30
255,000
200,000
36
36
37
wk 3
10%
wk 4
40%
(5,000)
(6,250)
(30,000)
(5,000)
(2,500)
(12,000)
(30,000)
(10,000)
(48,000)
285,000
Month 1
28
245,000
200,000
+60 days
30%
Week 4
Week 1
285,000
MONTH 3
Week 2
Week 3
250,000
CHECK
Monthly Cash Receipt Profile
MONTH 2
Week 2
Week 3
Week 4
200,000
(5,000)
(37,500)
(15,000)
(5,000)
(37,500)
(15,000)
(2,000)
(15,000)
(6,000)
(8,000)
(60,000)
(24,000)
255,000
• Accounts receivables for the next 60 days should
be estimated by and agreed with AR manager /
credit controller
• Discuss with AR manager / credit controller:
- Large significant receivables
- Old or problem receivables
- Credit notes
- Apply 80/20 rule
• Review the AR days & profile that your forecast
shows, in the light of:
- Sales forecasts
- Historic sales and AR days
- Monthly cash receipt profile
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Cash Forecasting at CEVA Treasury
17 July 2015
13 week forecast – Accounts Receivable
AR wk 3
• Waterfall breakdown of AR:
- Datadump out of GL
- Aging is known
- Adjustment for paying
discipline customers
- New business overlay
60
40
20
0
week 1
week 2
week 3
week 4
week 5
week 6
week 7
week 4
week 5
week 6
week 7
AR wk 4
AR next
week 4
week 5
week 6
week 7
AR wk 4
60
40
20
0
week 1
week 2
week 3
AR wk 3
120
90
60
30
0
week 1
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Title of Presentation
week 2
week 3
17 July 2015
13 week forecast – Accounts Payable
Where can other data be sourced from?
• Payroll costs, payroll taxes & pension costs:
HR
• VAT & Taxation: Tax department
• Rent, rate & property costs: Purchasing and /
or Facility Management
• Accounts payables for the next 60 days should be estimated by and agreed with AP manager
• Discuss with AP Manager:
- Large significant payables
- Old or disputed
- Impact of early payment discounts
- Apply 80/20 rule
• Review the AP days & profile that your forecast shows, in the light of:
- Current purchasing forecasts
- Historic purchases and AP days
- Monthly cash payments profile
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Cash Forecasting at CEVA Treasury
17 July 2015
13 week forecast
• Intercompany payments: No intercompany matching in process (yet), for
reporting IC payments/receivables are excluded.
• Reporting and consolidating with Excel and Visual Basic (Macros)
• Reporting headroom
analysis for
headroom
development and
financing planning
(drawings on credit
lines)
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Cash Forecasting at CEVA Treasury
17 July 2015
Accuracy test
• For: Account Payables, Account
Receivables and Operating Cashflow
before intercompany
• Week on week analysis
• Month on month analysis
Period:
year
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
12
week
7
8
9
10
11
12
13
14
15
16
17
18
19
Apr-10
OCF
(80)
(180)
(180)
(40)
(40)
(409)
(362)
(107)
390
(319)
681
824
824
93
Pay
(4,380)
(4,480)
(4,480)
(4,340)
(4,340)
(4,709)
(4,862)
(5,072)
(5,073)
(6,135)
(5,836)
(5,922)
(5,922)
Cash Forecasting at CEVA Treasury
Period:
Rec
4,300
4,300
4,300
4,300
4,300
4,300
4,500
4,965
5,463
5,816
6,517
6,746
6,746
7
8
9
10
11
12
13
14
15
16
17
18
19
May-10
OCF
(260)
(800)
(800)
(800)
(800)
(800)
(800)
(1,089)
(714)
(886)
(253)
7-May-10
19
(600)
(156)
444
843
14-May-10
20
(386)
(77)
309
21-May-10
21
140
(160)
(300)
28-May-10
22
(40)
140
180
Receivables
18_2010
19_2010
Delta
Total delta
1,489
1,954
465
609
800
944
144
800
800
-
800
800
-
Payables
18_2010
19_2010
Delta
Total delta
(2,089)
(2,110)
(22)
234
(1,186)
(1,021)
165
(660)
(960)
(300)
(840)
(660)
180
OCF
18_2010
19_2010
Delta
Total delta
98
Pay
(3,460)
(4,000)
(4,000)
(4,000)
(4,000)
(4,000)
(4,000)
(4,289)
(3,914)
(4,775)
(4,751)
Period:
Rec
3,200
3,200
3,200
3,200
3,200
3,200
3,200
3,200
3,200
3,889
4,498
7
8
9
10
11
12
13
14
15
16
17
18
19
Jun-10
OCF
(330)
(190)
(190)
(190)
(190)
(190)
(290)
103
Pay
(2,730)
(3,390)
(3,390)
(3,390)
(3,390)
(3,390)
(3,490)
Rec
2,400
3,200
3,200
3,200
3,200
3,200
3,200
17 July 2015
What did we learn?
a)
People track EBITDA, not cash
b) Contract Logistics is more predictable
c)
Freight Management is effectively an integrated global network; the cash
forecast does not represent this. A different approach is needed
d) 8 weeks are accurate, 3 months not
e) Local business plan validation is possible
f)
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Budget alignment is needed, every three months
Cash Forecasting at CEVA Treasury
17 July 2015
Next steps
• Set up global Freight Management CF platform / model
• More focus on accuracy from Exec Board
• Migrate from Excel to Database
• Cascade analysis and data downward for improved learning curve on CFF
• Simplify model (Less cost lines)
• Adjust frequency to every other week
• Adjusting for FX exposure
- Adding Foreign Currency cash lines
- Extending horizon to 6 or 12 months
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Cash Forecasting at CEVA Treasury
17 July 2015
Making cash flow