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Brown-Forman Corp Systems Approach for Working Capital Management

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Brown-Forman Corp. is a $2.7 billion purveyor of Jack Daniels whisky, Finlandia vodka, and other spirits and wines. The organization’s finance department is Louisville based and was burdened by a "Neanderthal" cash-management system that required the organization’s treasury staff to re-key bank information for the company's numerous subsidiaries into spreadsheets for daily cash positions, and to post accounts-receivable receipts from paper bank statements, among other manually intensive practices. "We had what was essentially a spreadsheet-era treasury system," says executive vice president and CFO Phoebe A. Wood.

Brown-Forman Corp. executed a comprehensive feasibility study defining the project's scope and objectives, project managers received the green light to draft a project blueprint. The blueprint encompassed the budget, task list, milestones, and associated

Change-management issues expected to crop up. The company designated a project leader created multiple working groups charged with exercising specific types of leadership, partnered with IT and the system's ultimate users, and established measurable Return On Investment goals.

Brown-Forman managed their implementation by breaking it up into pieces. "We created four distinct phases for the project: blueprinting, realization, final prep, and go-live/support," says Jaime Ryan, a principal at Media, Pennsylvania-based e5 Solutions Group LLC, the specialty SAP consultancy that assisted Brown-Forman. "We’ve reduced the total workforce associated with our cash-management processes by 60 percent and the resources required to manage our daily cash application and payments by 81 percent. And we've lowered the person hours required for month-end closing from 48 hours to 1," says CFO Wood. "Moreover, the project came in on time and on budget. For any project, that alone is pretty good." Brown-Forman demonstrates how process improvements made to the operating cycle benefits the organization’s cash cycle and cash-flow.

Companies can learn from this example, a system solution that implements accounting software for Working capital management would alleviate current cash management shortfalls.  The system would automate the tracking of customers and supplier payments (cash inflows and outflows). Capital management risks would be mitigated by an effective implementation strategy that includes strategic controls. The establishment of strategic controls (cash flow analysis, credit and collection policy) would lessen the risks and potential negative consequences that place Lawrence Sports in jeopardy.

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YouSigma. (2008). “Brown-Forman Corp Systems Approach for Working Capital Management." From http://www.yousigma.com.

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