Cash management is perhaps the single most important factor in running a successful business. In fact there are many large and well known companies who have never been profitable but still operate seamlessly. How do they do it? Simply by clever management of their cash flows.

For many, cash has always been a priority. But today, with access to debt and equity markets increasingly tough, cash is receiving additional attention. Irrespective of the financial health or trading outlook of the company, the benefits of prudent cash management and cost reduction are obvious. Many CFOs and corporate treasurers know how to manage their cash. Most will consider squeezing working capital, optimising tax policies or liaising with lenders to increase the flexibility of their financing arrangements. But few will have in-depth experience of putting pressure on all of these levers at once, when unstable markets make traditional methodologies harder to apply.

So what can you do to improve your cash flow position? Here are a few tips:

Manage Currency Risks: Foreign exchange can have a direct and sizeable impact on a company’s financial risks. The increasingly global nature of businesses and current volatility in the foreign exchange markets requires careful consideration of local operations and cross-border trading. By implementing short term foreign exchange policies you can provide immediate protection against risks such as cash flow short falls. Good treasury management can release value whilst minimising risk and maximising upsides.

Restructure Finance Arrangements: Regularly review the company’s current financing arrangements with its suppliers and lenders, and negotiate whether these can be restructured or replaced to increase flexibility of your cash-flows. Examples include negotiating longer credit days, restructuring your purchasing commitments, moving to consignment inventory etc.

Reduce or Re-Evaluate Capital Projects: Capital expenditure can be a significant draw on cash and simply turning off the tap can cause long term damage to a company’s asset base. Review the company’s current and forecast Capex projects, determine the necessity of spend in an accounting period, assess cost/benefit and implement investment programmes to reduce or defer cash spend.

Simplify Organisational Structure: With Group structures expanding over time, either organically or by acquisition, they can become unwieldy and divert management time and funds away from the core purpose of running the business. Add to that mix dividend traps and unknown contingent liabilities and the risks can begin to stack up. Identify inefficiencies in your current structure and rationalise your corporate structure, thus reducing governance costs and redundant compliance costs to free up more cash.

Reduce Tax Cash Costs: Even when companies have specialist tax department they are normally focused on managing the effective tax rate rather than optimising cash-flow. Look at ways to accelerate tax refunds and raise cash or save cash costs through careful tax planning, maximise the use of losses to reduce cash tax payments and optimise indirect tax cash flows.

Maximise Use of Existing Cash Accounts: With management focusing on profit growth there can be a significant amount of cash value tied up in divisional or international entities. By closely monitoring the treasury function, you may be able to unlock cash, centralise liquidity management, and increase the speed at which cash can be accessed. At a time when debt financing markets are increasingly challenging, unlocking cash already held in the business can help reduce funding requirements.

Improve Financial Reporting and Controls: Accurate and timely information is essential if management are to respond to the challenges posed by the current economic climate. A focus solely on profit related metrics in management reports can result in lost opportunities to optimise cash-flow. By looking at Group finance, its internal and external reporting processes and its interactions with other parts of the organisation, you can focus on fast payback initiatives and implementation of processes to improve the speed, cost, accuracy of the financial close process and to embed a focus on cash-flow within the business. This can then allow management to make better and quicker decisions about the business.

Reduce Costs: In the current economic climate where it has become increasingly difficult to drive top line growth, protecting profits and cash through cost reduction programmes has become imperative. Align your cost base with future revenue expectations, and resize large scale overhead and direct costs.

Exit Operations: Whatever the market, a well planned and implemented exit can reshape a business and unlock value without consuming excessive management time. Timing and planning of an exit is critical. This can provide management with an opportunity to restructure balance sheets, improve trading performance and refocus their business whilst maximising value, and freeing up cash.

Reduce Pension Costs: The last few years have seen a significant shift in the pensions’ landscape pushing pensions further and further up the corporate agenda, not only from a strategic focus but from the potential financial risks that they can expose. One way to mitigate deficits in the pension fund is to transfer some of the company’s property assets to its pension scheme as a non-cash contribution, resulting in a possible uplift in the balance sheet value of the assets in the pension fund, and helping to meet the funding concerns of the trustees whilst at the same time helping to preserve cash flows in the company.

Relocation specialist, Del Sol Packaged (DSP) offers a complete portfolio of relocation solutions for businesses of all sizes wishing to relocate to the Costa del Sol, Gibraltar and surrounding areas.

With over 20 years experience of relocating, the dedicated team at DSP will work closely with each client to create a tailor made relocation package to suit the clients needs.

Executive Relocation - Relocation is listed in the Top 20 stressful events of life.

The hassle of relocating a company can minimize productivity and profits and leave staff feeling de-motivated.

An executive relocation package from DSP means that we will direct the whole relocation process from initiation through arrival and repatriation, leaving your business and employees to continue your business activities as normal.

A representative from DSP will liaise with your organisation to find solutions to your relocation problems. The basic services included in the package are; an introduction to Spanish culture and language, orientation tours of the local area, assistance with transporting goods and furniture, sourcing business premises and accommodation for employees, handling all legalities and administrative issues with local authorities (such as setting up NIE numbers, bank accounts, tax payments) and setting up international business networks in Spain.

For those of you who have not already attended a function at the newly refurbished Mons Calpe Suite Car at the Top Station of the Cable Car, you should take the opportunity to check it out. This already stunning venue has had a massive and spectacular facelift.

The result allows the visitor to fully appreciate the extraordinary views that the venue offers.

Complete with seating for 60 guests, PowerPoint and conference facilities, this is the location to make a corporate statement, even before you make the speech! Already, the venue has played host to the historic Trilateral Forum of Dialogue on Gibraltar, entertained guests who were invited to an evening with ex-England Rugby Captain, Martin Corry MBE (pictured below) and lunch with Sir Alex Ferguson, CBE, Manager of Manchester United FC.

The Mons Calpe Suite is licensed as a venue where couples can actually get married and then celebrate with family and friends.

It has teamed up with one of Gibraltar’s top restaurants, the Boatyard, who provide all the catering in-house. Together, they have created a wide variety of menus including a la carte, corporate and Christmas menus as well as a selection of delicious canapés.

These last eight months have seen an interesting change in the real estate market in Gibraltar. Some market reports have indicated that Gibraltar has not “burst” quite as hard as other European countries in this global recession.

Whilst we would agree with this in part, it is certainly apparent that activity has slowed down. Gibraltar is not capable of continuing a real estate boom when there is a global crisis at hand. However, it is also clear that it does seem to be faring more favorably than other countries which have experienced significant reductions in real estate values, which have fallen up to 50%.

The reality is that prices have, and will continue to fall until the financial markets recover and banks start lending at competitive rates. Many vendors have reduced asking prices between 10% – 15% so far this year, and sales are also completing below asking price. Furthermore, the increase in the number of new developments, combined with the increase in owners now looking to rent, rather than sell, has also had a negative impact on rental values. The correlation between rental income and sale prices is therefore showing a disparity with investment yields on the majority of new developments achieving under 5% gross yield. Typically, rental yields are below the cost of finance and this signals a clear sign that prices are too high!

What about the UK market? The Royal Institution of Chartered Surveyors reported last week “that the balance of surveyors reporting a rise in prices against those reporting a fall rose to -8.1 last month from -17.6 in June. The latest survey provides more evidence that activity in the housing market is picking up, albeit from historic lows. New buyer inquiries have now increased for nine consecutive months.” This has been reported in a leading national newspaper as the highest since August 2007, when the credit crunch first took hold of world markets, and marks a run of improving figures since the start of this year.

The Gibraltar property market has seen an estimated 800 new residential units delivered to the market since 2007. This includes developments which are still under construction, including Kings Wharf and Ocean Village. Our market study shows that on average, a range of 20% to 50% of new developments are now being resold by private investors. This indicates that many off-plan sales were speculatively driven with investors now needing to exit to release equity. Between 300 to 400 new units are therefore currently on the market.

Despite these figures, market sentiment remains strong. The local property market is fuelled by the growing economy and those corporations relocating to Gibraltar who bring with them many employees who need accommodation. This activity also stimulates the commercial sector as demand for office space continues.

We should also remember that our European counterparts have a significant role to play with our growing economy, many of whom buy property in Gibraltar to reduce their global tax status. However, it is also important to remind ourselves that buyers simply want, and expect to find a bargain in this market, and this will continue to stabilise prices.

So what of the end to the recession and the fall in property prices?

Nationwide’s price performance data shows that UK prices have risen 1.3% since the start of 2009 and they believe that there is a reasonable chance that prices will end the year higher than where they started. During the 1990’s property crash, house prices fell from a peak in the third quarter of 1989 and didn’t bottom out until the first quarter of 1993, three and a half years later. They fell 20.2% during that time, and it then took until the first quarter of 1998, five years later, for prices to reach their previous peak.

What of Gibraltar? The local housing market is picking up with new buyer inquiries increasing for four consecutive months. Will we follow the UK trend? There are two main reasons why we believe our market will move out of recession differently. One is that we do not suffer from high unemployment which maintains buyer confidence and the other is that the market should continue to experience strong lending growth. Hopefully we will see a bottoming out within the next three to six months, with prices turning the corner in the second or third quarter of 2010.

The volatile markets which investors have experienced since the onset of the credit crunch, combined with the low interest rate environment, presents many challenges for Gibraltar’s investment community.

The market conditions have brought the role of the Treasury arms of the major international banks into sharp focus for many professionals who are searching for appropriate solutions to meet the needs of their clients in these testing conditions.

Requests for interest rate outlooks and exchange rate forecasts have increased, a reflection of the increasing concerns that investors have about where to place funds for investment purposes. At RBS International and NatWest, we have been finding that more clients are looking through our research data and economic forecasts, and there is perhaps less reliance on the opinion of credit rating agencies in reaching decisions.

In the low interest rate environment that we have been experiencing, many clients are faced with a dilemma in seeking flexibility to retain access to their funds, perhaps driven by a requirement for regular income, while needing to commit to ever longer terms in order to obtain higher returns.

Treasury teams have been seeking ways to resolve this dilemma by talking to clients more frequently and considering how their expertise can assist in managing the risk inherent in these volatile markets. So in response, for example, there has been a need to provide more innovative, bespoke solutions and more flexible, structured product offerings.

Capital protected products have proved popular, particularly with the most risk averse clients who want an assurance that even when pursuing higher returns, there is a certainty that, in the worst case, the capital will be preserved.

RBS International has devised specific products for the market conditions and further schemes are scheduled.  These have ranged from limited term offers with high coupons to more complex stepped return products where the client has the flexibility to break a term deposit without penalty at quarter dates but should the deposit run full term, enjoy higher returns in the latter stages of the deposit.

The funds industry has been another sector that is appreciating the value of treasury solutions in meeting client demands. While funds may deliver excellent returns on their underlying assets, without appropriate risk management these returns could be eroded by currency movements outside of the funds’ control. For some funds their investors may choose to invest to create exposure to certain currencies and in these cases hedging may not be at all appropriate. For others, failure to hedge may actually contravene commitments made to investors.

Working closely with our clients and with colleagues across The Royal Bank of Scotland Group, we have developed extensive experience in helping funds manage their currency risks whether these derive from multiple currency share classes, a mismatch in currency of income and expenses, foreign currency asset acquisitions and disposals or ongoing asset/investor equity mismatches.

This experience can prove valuable to both funds and fund administrators alike. For an administrator, using hedging to manage exchange rates can greatly simplify making calls on investors, or in paying distributions if the underlying investment is in a different currency to that in which the fund is denominated. Likewise, being able to manage the currency exposure between a funds income and operating expenses can assist greatly in the ongoing cash management of the fund.

Currency market volatility has posed a considerable threat to investors. For example many trust companies form structures on behalf of their clients with exposure to currencies but in the current environment, the risk of losing out due to the exchange rate is heightened.  The Bank’s Treasury team has the experience and insights to provide foreign exchange and interest rate risk management for clients with such exposures.

At this time, it is important that clients review their needs and examine carefully whether they have taken appropriate steps to mitigate risk and achieve sufficient returns from their investment. For clients it should be about ongoing dialogue with their advisers including their banking service provider.

At RBS International and NatWest, we are keen to foster a partnership approach with our intermediary clients, and to deliver bespoke solutions that will meet specific needs. For some clients, preserving capital through existing capital protected products will be appropriate, but for others, a more bespoke solution may be required. The sooner that clients engage with us the earlier we can help in identifying and quantifying potential risks and working together to understand the key drivers in determining an appropriate risk management approach.

Despite a dismal global recession, Gibraltar’s robust and resilient economy has continued to grow at a stable rate. Be they local and foreign, entrepreneurs and investors alike have turned their heads in our direction, towards what many consider a radiating beacon of success and an excellent platform for the establishment of secure international business.

Gibraltar’s highly developed business services infrastructure, international transport links, a legal system modelled on the English structure and the possibility of investing or conducting business affairs in a low tax yet well regulated jurisdiction are just a few reasons why a worldwide commercial audience, ranging from brand new investors to long established businesses, are setting up, diversifying or expanding ventures locally.

Gibraltar is both a strong and mature British-European trading hub, capable of weathering the worst economic downturn in recent times as well as able to suitably accommodate and cater for the needs, wants and desires of a wide variety of businesses, regardless of their national derivation.

The fact that Gibraltar is renowned for encompassing a harmonious, culturally diverse society is another facet that adds merit to an already safe bet, certainly when one requires a globally tailored base for operations. However, do not let this portrayal of serenity pull the wool over one’s eyes, as where on the surface Gibraltar exudes an air of equanimity, in a place bursting with historic and natural beauty, a bustling and vibrant economic system toils efficiently and productively from within.

The InvestGibraltar Office, the Government of Gibraltar’s frontline one-stop-shop for commerce, affords those that wish to invest or conduct business in our soundly ticking jurisdiction general advice, guidance and support. This complimentary service is provided via telephone, email and face-to-face meetings, which are always carried out in a professional environment. The Office focuses on the bigger picture and makes every effort to fulfil a common goal, growing the internationally attractive business centre Gibraltar is today.

The Office’s database houses a vast amount of relevant information, including details centring on the origin and nature of a steadily growing number of business related enquiries, face-to-face meetings and successful start-ups. Recent analysis suggests that Gibraltar attracts most of its business from the British Isles, neighbouring Spain and Morocco. The jurisdiction to a lesser degree likewise secures interest from the majority of European states, including The Netherlands, Italy, Sweden and Hungary, as well as from the US.

When looking at the nature of these, which in 2008 alone comprised of circa 750 enquiries and 120 meetings, the Office can divulge that the most popular sectors of economic interest involve Trade & E-Trade and Financial Services & E-Commerce followed by Communications & E-Gaming and Property Development.

Individuals that use the InvestGibraltar Office benefit from acquiring a wealth of free information and literature. Such information and literature is made available as part of the Office’s Business Support Packs, which include Guides ranging from ‘How to set up a Business in Gibraltar’ and ‘Trade & E-Trade in Gibraltar’ to ‘Communications & E-Gaming in Gibraltar’ and ‘Financial Services & E-Commerce in Gibraltar’. The Packs also contain related Guides that, for instance, show users how to make a Business Plan and allied Financial Forecasting documentation, which may similarly prove invaluable for the user. The Packs likewise incorporate material that has been produced by other Government Departments and associated institutions.

All Guides have been meticulously fashioned to assist and inform the user on a variety of business related topics. The objective here is to again fully cater for the needs of both local and foreign entrepreneurs and investors in an ever-changing business environment. Any and all Office Literature and information is made available to enquirers upon request by calling Tel: +350 20052634 or via Email: info@investgibraltar.gov.gi

For more information on local business related matters, please contact Mr Javier Redondo or Mr Dustin Orfila at the InvestGibraltar Office, Department of Enterprise & Development, Suite 771, Europort, Gibraltar, who will be happy to be of assistance.