Time Out for Foreign Cash Flow
Art Allen founded Allen Systems, a manufacturer of mainframe computer software, in 1986with $2,000 from personal savings. By 1993, the company had grown to $12.5 million in sales. Allen credits the company's growth, in large part, tohis obsessive focus on daily cash management.
"With $3 million worth of receivables--about half of that being paid by international customers into our overseas bank accounts--we could not afford to tie upour cash while we waited to act on weekly or monthly bank statements," Allen says.
Instead, by 2 p.m. each day, an accounting staffer at Allen's Naples, Fla., headquarters receives faxes updating the status of each of thecompany'sinternational bank accounts--total deposits, the U.S. exchange rate and a current value in U.S. dollars of the company's checking and money-marketaccounts. (The company set up the overseas bank accounts to deposit overseas collections faster.) Each day, Allen decides how much cash should stay in theforeign banks and how much should be transferred back to the United States. "To get money back here from a bank in Brazil or Spain might take two weeksor more," he explains.
The cost of such intensive cash management is about $1 per day for each bank's fax and an hour of a staff person's time. Allen spends only 10 minutes a daymaking his decisions, and the results, he says, "are well worth it."