Good article in today's WSJ regarding Chevron "Hoarding the money it makes from oil and gas operations" for some future need.  Speculation is that they are either hedging against a spike in costs or planning to buy up some smaller rival as their cash levels have risen 60% over the last year. 

 

While Chevron is today's headline name (for good reason as they have more cash on the balance sheet than any publicly traded company, per the WSJ article), the dynamics are of course nothing new over the past few years: Companies hoarding cash at unprecedented levels against some future contingency or investment.  And while some investments are being made and/or plans are becoming more concrete than a year or two ago, companies like Chevron are still holding this cash "for the future".

 

The question I have is what are they planning to do with that cash in the meantime?  "Invest" it (and I use that word loosely) in money market funds?  CD's?  Interest bearing bank deposits?  While these options certainly meet the criteria for liquidity investments of Security & Liquidity, earning next to nothing they fall woefully short of the third treasury management pillar of Yield.

 

I don't know what Chevron plans to do with their cash, but I do know what others have done to put that cash to work in their supply chain and who, through the use of eInvoicing and Dynamic Discounting, have turned their AP operations into profit centers.  In fact, one notable energy sector company who has done exactly that, ONEOK, will be presenting with me on a Treasury & Risk educational webinar on september 20th entitled: Mining Payables for Profit in an Uncertain Global Economy.

 

At ONEOK, treasury is playing a key role in driving this transformation. In this free webinar, T.D. Eureste, director of finance and treasury, will explain how cloud computing and electronic invoicing is becoming a foundation technology for “dynamic discounting” that is boosting cash earnings and profits.

If you attend this webinar, you will learn how to:

  • Achieve double-digit returns on your short-term cash with no risk
  • Expand discount opportunities to new groups of suppliers, and on a prorated, sliding scale up to the invoice due date
  • Drive supplier participation by communicating a clear value proposition: visibility into invoice and payment status for better cash flow forecasting and opportunities to reduce days sales outstanding (DSO)
  • Embrace cloud computing to protect against fraud and support mobile operations

 

Keeping cash on the balance sheet right now is probably a very good idea, given the uncertainties in the market right now.  But letting it sit idle in traditional short term liquidity vehicles is not, and it misses a great opportunity to both improve your yield on cash and provide much needed liquidity to your suppliers.