Home Work

Readers comment on the perils of flextime, the realities of working capital, and more.


CFO welcomes your letters. Send them to: The Editor, CFO, 51 Sleeper St., Boston, MA 02210

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Please include your full name, title, company name, address, and telephone number. Letters are subject to editing for clarity and length.



I'd like to see more companies attempt to quantify the cost savings to their companies and their employees that result from working at home ("The Perils of Flextime," July/August). I have to think that equipping a home office would be less expensive than the real-estate costs of a commercial office building, whether owning or leasing.

In an age where companies do business all over the globe, the idea of needing to constantly be in the office for any job seems more archaic by the day. If we telephone our office mates who are down the hall from us, why can't we have the same meeting via Skype or videoconference from our home offices?

Dallon Christensen



A Bothersome Calculation

Regarding your latest working capital scorecard ("Working It Out," June), while you note that lower receivables are good (because you are able to convert receivables to cash more quickly) and lower inventories are also positive (because that means you're not tying up working capital in slow-moving inventory), part of the working capital calculations bothers us: the accounts-payable side. You note that "an increase in DPO (days payable outstanding) is an improvement, a decrease a deterioration," and you cite examples of companies that, because they were severely strained, sought to basically save themselves from extinction by stretching out their payments with less-important suppliers.

We can certainly understand and recognize the need to scramble when there's a debt problem and the survival of the company is at stake. And we suspect the suppliers were happy to take the business, even if the payments weren't what they had initially expected. But overall, the survey showed that the deterioration in days sales outstanding for 2009 was just about equal to the jump in DPO, so the two activities tend to cancel each other out.

We don't think that higher DPO is a cause for celebration for any firm, even those seeking sound working capital management. Our capitalist system works because of our great respect for the rule of law and for the sanctity of contracts. In anything other than a crisis situation, a company's first priority should always be to honor the terms negotiated with its suppliers. Systematically slowing payments to valued suppliers is hardly what we'd call "an improvement."

Robert Lawson
Roanoke, Virginia



Is Faster Better?

Your article "Breezing Through Bankruptcy" (June) addressed many of the key pros and cons of the "speedier" Chapter 11 process, including the impact of the amendments to the bankruptcy laws in 2005. As counsel to, among other constituencies in Chapter 11 cases, the official committees of unsecured creditors in Macy's, Kmart, US Airways, Northwest Airlines, Bi-Lo supermarkets, Reader's Digest, Atrium Corp., and Escada, I can provide some further insight.

The faster bankruptcy process has particularly hurt retailers because they can no longer utilize Chapter 11 to test a revised business plan during the "next" Christmas season. In particular, as a result of the seven-month maximum time period for rejection or assumption of leases, retailers no longer have an adequate period of time to determine if the changes they make to their business models have succeeded. If a retailer were to learn that its proposed changes do not work, it now will not have sufficient time to correct them. In addition, and putting aside the current limited capital available for purchases and sales, the changes in 2005 severely restrict the ability of a retailer to sell (that is, assume and assign) any valuable leaseholds.

Since the late 1970s, valuable real estate leases have been used extensively as a means of raising cash for the benefit of all stakeholders in a bankruptcy case. However, more than the seven months the statute currently permits is required to effectively dispose of these leasehold interests. Of course, the shorter a Chapter 11 proceeding lasts, the lesser the cost. However, that benefit can be materially outweighed by the loss of flexibility and realizing the greatest recovery for all creditors.

As an aside, a dynamic in late 2008 also caused negative consequences and drove cases to a speedier resolution. That dynamic related to the need of the hedge/private-equity funds that had invested in the second lien debt to liquidate their positions as quickly as possible to generate cash for their own investor withdrawals. Hopefully, as more capital becomes available, more flexibility for Chapter 11 debtors can be created and a better balance between speed and cost can be achieved.

Scott L. Hazan
Chair of the Insolvency and Creditors' Rights Practice
Otterbourg, Steindler, Houston & Rosen PC
New York



Prevention Is the Best Approach

It's important to understand how damaging reputational crises can be ("What's a Reputation Worth?" May). But the real story is how to prevent them.

Seventy percent of the value of the average company is intangible. This is because processes, knowledge, and networks (all considered intangible by accountants) are the core drivers of competitive success — and reputation.

Managing reputation starts with managing these intangibles. That's why we say reputation is the new bottom line.

Mary Adams
Founder and Principal
I-Capital Advisors
Winchester, Massachusetts



Choice Offerings

After the worst market crash and economic pullback in decades, this year there has definitely been renewed interest in providing some form of [retirement-focused] financial education to employees — as both a value-added benefit and to better meet a plan sponsor's 404C ERISA requirements ("Sea Change," April). The article deftly points out the angst of employers as they attempt to understand what resources and tools will get the best response and not promote a conflict of interest. There is, in fact, a huge disparity in how employees respond to such offerings, due to lack of time, job insecurity, market fear, and uncertainty as to whether the resource provided will even make a difference.

This means that there should not be just one generic education resource offered. People differ in the level and form of service they desire. A "one size fits all" approach is not likely to be effective. While I do applaud HR directors for taking the initiative to provide some form of advice, there needs to be better across-the-board education for plan sponsors and HR directors to vet what forms of advice are available, including specific feedback on program elements. Many companies fear that offering more than one source of financial education will create confusion or conflicts of interest, but in fact offering a full menu of phone, online, and onsite resources allows employees to gravitate to the tool or resource that best meets their goals and personalities.

Jon W. Ulin
Ulin Financial Group Inc.
Boca Raton, Florida


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