Once I advised a client that was planning their cash flow needs for the coming year that should the business achieve a DSO of under 30 days then it could reduce its Trade Receivables outstanding by over 40% in dollar terms. Because of the nature of the contracts and their terms, the subject business was able to reduce both its DSO and trade receivables thus the amount of cash required to finance “the turn” was greatly reduced. This folks is called managing by the numbers and it not only works, but is typically the hallmark of the way best in class organizations are managed.
And by way of comparison we have this from the past weekend:
SRHS mess: Board minutes shed light on financial troubles, but meetings secret ~ Karen Nelson and Anita Lee
The hospital received a waiver from bond covenants and was able to finalize the audit June 21, according to the trustees’ minutes. The county did not receive the audit until July 9 — more than four months after the deadline. Crews told trustees he had negotiated a bond covenant allowing Singing River to have 55 days’ cash on hand, as opposed to 60, by Sept. 30. Crews reported to the board Sept. 25 that 56 days’ cash was on hand, but it was likely to decrease to 51 days when payroll was run later in the week.
So they would comply with bond covenants, Crews and Anderson suggested the board allow them to establish a line of credit for up to $5 million at Merchants & Marine Bank. Trustees unanimously approved the request. The Board of Supervisors also had to approve an increase in Singing River’s borrowing authority, according to a trustees’ resolution attached to the minutes.
This of course does not count the multiple refunding of bonds previously issued beginning in 2008 per my perusal of EMMA. So what was accomplished from a money standpoint by these gyrations? First off a local bank made some money because credit facilities are not free. So beyond paying a banker what did the financial engineering accomplish?
The financial management on display at SRHS is that of rank amateurs pretending to wear big boy pants and that brings me to Frank Corder’s piece today at YallPolitics:
The SRHS Board of Trustees needs to be replaced, each and every one.