1. Romanian companies
Romania
neglect liquidity
reserves
Many Romanian companies could improve their liquidity considerably if they
used the capital they have tied up in current assets – known as working
capital – more efficiently. This is the main finding of a recent study carried out
by Horváth & Partners among 143 participating Romanian companies.
Kurt Weber,
Managing Director,
Horváth & Partners Romania Many Romanian companies are giving away valu- Working Capital Management makes
able liquidity reserves. This is the amazing conclu- capital efficiency measurable
sion arising from a study by Horváth & Partners.
“50 percent of the compa- Amazing particularly, because it came in a time of Actually, most Romanian companies already ac-
nies have already made prolonged crisis and limited access to financing. tively and intensively engage in the management of
changes to their reporting
According to the study, fewer than fifty percent of receivables, liabilities and stocks and indeed those
systems, adding key perform-
ance indicators measuring the companies questioned actually have achieved who do so are not restricted to the capital-intensive
the performance of working a reduction in working capital, thereby converting industries. However, it is apparent that working
capital management.” tied capital into liquid assets. “The majority of the capital management is a very new tool for many
remaining companies could create considerable companies in Romania: Only around half of the
increases in liquidity by rigorously anchoring as- participants have been using it for more than two
“The study has shown that
companies regularly fail to pects of capital efficiency in their management years, but in most cases they rely on traditional
adhere to working capital control systems,” says Kurt Weber, Managing Di- performance indicators which means they are fo-
and cash flow calculated rector of the Bucharest office at Horváth & Partners cusing purely on profit and turnover. “50 percent
during planning which, in
and head of the study. “These aspects would in- of the companies have already made changes to
the worst case, can lead to
unnecessary financing costs clude measures such as taking sufficient considera- their reporting systems, adding key performance
arising for sales.” tion of capital efficiency in financial performance indicators measuring the performance of working
indicators, integrating it in the target setting proc- capital management,” adds Kurt Weber. “More-
ess and clarifying responsibilities.” over, much is amiss when it comes to responsibilities
12 CONTROLLER Spezial | Controlling International

2. for receivables, liabilities and stocks; trade creditors, while debtors from German speak-
there are often several different people ing countries take only 24 days to pay their suppli-
responsible for the different elements.” ers. “This behavior is threatening the liquidity of
Additionally, most attempts at anchoring suppliers, resulting in a major supply side risk for
capital efficiency in the incentives systems the company,” Kurt Weber explains.
were often only halfhearted, despite the
fact that little investment would be required Finally, the findings of the study show that capital
to create awareness from which ideas and efficiency is seen as increasingly important by
concrete measures for reducing tied capital Romanian companies – and especially so in these
could spring. times of uncertain economic and financial markets.
Nevertheless, many companies appear to lack ei-
ther the will or the ability to add meat to the bones
Integrated approach improves of working capital management, even though this
receivables management would generate valuable stability, especially for
companies with poor liquidity.
Receivables management is the most important
source of potential for improving liquidity. Another
finding of the study, however, is that receivables
management lacks an integrated approach in
many companies: Often, no or only fragmented
information is used for evaluating client creditwor-
thiness, thus resulting in a high client risk exposure.
External creditworthiness information which can
be a useful addition to internal, historical data is
hardly used at all. Companies often also lack
clearly defined procedures for calculating credit
limits and setting payment terms. This is also a
problem for the quality of dunning and collection
– often with dire consequences, as Kurt Weber
explains: “The study has shown that companies
regularly fail to adhere to working capital and
cash flow calculated during planning which, in the
worst case, can lead to unnecessary financing
costs arising for sales.” The weaknesses in receiva-
bles management of Romanian companies are al-
so expressed by key performance indicators such
as days sales outstanding (DSO). Companies in
the German speaking world, where the same Romanian work group meeting
study was carried out in 2009, manage to cash in
outstanding sales in 41 days, almost twice as fast The members of the ICV work group Bucharest (Romania) met again on 2 –
as Romanian companies (78 days). 3.07.2010 in Busteni, in the Carpathian Mountains. Cristina Hodea, the leader
of the work group, welcomed two guests from Germany: Ms. Nicoleta Thomka
and Mr. Herwig Friedag.
Suppliers negatively affected by The main topic of the meeting was “Strategy”; some of the participants held
debtor behavior presentations related to this topic; they were followed by vivid plenum and
group discussions. All guests appreciated the high level of the presentations and
Liabilities from suppliers are the second ranked the results of the group work. The atmosphere was relaxed, the participants
source of potential for liquidity improvements. The discussed intensively, laughed together and also watched matches of the foot-
study shows that Romanian companies are using ball World Cup.
this source of liquidity out of proportion, thus over- A film recorded during the meeting is available at “Controlling.TV” at the
compensating the days sales outstanding. Compa- ICV website www.controllerverein.com.
nies are taking on average 174 days to pay their
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