The State of Treasury Survey, 2009

In an effort to determine just how the recession and stubborn credit environment have impacted treasury operations at organizations around the country, Business Finance magazine initiated an online survey of its readers this summer. One of the most prominent findings is the degree to which the recession is prompting financial officers and treasurers to focus on their organization's cash flow and working capital. As Jim Kraus, controller with U.S. Axle, Inc., in Pottstown, Pa., says, "It all has to do with 'cash is king.' You have to manage working capital."

Financial officers also shared their thoughts about the current cost and availability of capital, extending credit to new customers in an iffy economy, counterparty risk, and their approach to accounts payable and receivable, among other issues. On the positive side, at least a few financial executives indicated that the profiles of their departments have risen as the financial environment has become more treacherous and volatile.

The Never-Ending Crunch

Respondents aren't just reading about the credit crunch. Instead, many are living it. About half the survey participants -- 49 percent, to be precise -- either strongly or somewhat agreed with the statement, "Over the past year, my firm has had a more difficult time obtaining bank credit." Similarly, 52 percent of respondents indicated that bank credit had become more expensive. The breakout: Bank financing had jumped 200 basis points or more for 13 percent of survey participants. It was up between 100 and 199 basis points for 15 percent of respondents. And, one-quarter of respondents said bank credit had risen by up to 99 basis points.

The increase in the cost of capital respondents that experienced varied with the sizes of their firms. Somewhat surprisingly, a higher percentage of those from firms with revenues of $500 million or more were slightly more likely to say that capital was more expensive and harder to get. Fifty-four percent of respondents from the larger firms said that they were having more difficulty accessing capital; this compares with 45 percent of survey participants from smaller firms.

Similarly, 62 percent of respondents from $500 million-plus companies said that their cost of capital had risen. This compares with 48 percent of those responding from smaller firms.

The results may reflect the fact that credit for smaller firms already was more expensive and less accessible than it was for larger firms, notes Craig Jeffery, managing partner with Strategic Treasurer in Peachtree City, Ga. In addition, banks are limiting their exposure to both industries and individual firms. Thus, larger firms in some industries are taking a double hit, he adds.

Banks aren't the only ones that have become choosier when it comes to whom they're doing business with. More than a few respondents are taking a harder look at new customers. Nearly one in ten are turning down a higher percentage of applications from new customers, and 37 percent require a stronger credit profile before they'll extend credit to new customers. Three percent have switched to cash-on-delivery with new customers.

At Cover-All Technologies, Inc., a Fairfield, N.J.-based provider of software for the property and casualty industry, management has tightened up on the upfront payment required with new license deals, says Ann Massey, chief financial officer. While the company has long required half up front, at times management would allow 30 percent. Management again is more strictly enforcing the 50 percent requirement.

An anonymous survey respondent said that his or her company is making greater use of retainers when doing business with new customers. Another indicated that his or her firm is modifying contracts with new customers to facilitate the filing of what is known as the UCC-1, or Uniform Commercial Code Form 1. These forms are filed, typically with the secretary of the state in which the debtor or customer is incorporated, to show that the supplier has a security interest in the customer's property.