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Q&A: Yupi Indo Jelly Gum

Jan 14, 2013 | By |

Fransiscus Budi Pranata, finance director of the Indonesian gummy manufacturer, discusses the creation of his bespoke performance dashboard.

Q: What does your role as the finance director entail?

A: I cover accounting, finance, IT, payroll, and managing external regulatory relations. Strategically, I’m looking to manage cash flow and improve working capital, prepare our five-year strategic plan, control costs, manage reporting, improve performance, and secure finance to increase our capacity.

I oversee 28 people in those five divisions. I have managers in accounting, finance, regulatory and compliance, and assistant managers overseeing IT and payroll.

Q: What have been the key initiatives you’ve put in place since joining in September 2011?

A: There are two key projects I’ve implemented since joining the company. I’ve launched a real-time performance dashboard that helps my teams monitor sales performance. I’ve also been engaged in raising a $20 million multi-currency finance deal to help us expand our production facilities to meet increased demand.

Q: How does your online and real time performance dashboard work and what are the benefits?

A: The goal was to have a daily and weekly monitoring of performance so that corrective action can be quickly done to achieve target sales.

What we did was install an SAP program, “Business Intelligence”, that was plugged into our Microsoft ERP system, Microsoft Dynamics AX. The programme gives us hourly updates on accounts receivable (AR), balance, and what’s overdue both domestically and internationally. We then take that and make an Excel chart that we update weekly. We also have an inventory level for finished goods and everything that’s in process.  

Through that we monitor our working capital on a daily basis. We also monitor our cash in/cash out through overdue AR and accounts payable. Right now our accounts receivable days is about 40 days, while our accounts payable is about 60 days, our inventory is about 45 days after sales. The daily monitoring of that is automated through the web-based dashboard linked to our ERP system. The weekly monitoring is reviewed by our finance manager on Excel.

Q: So what value has the dashboard added?

A: It allows us to see whether we’ve hit our sales goals. We target our sales by province in Indonesia and by the 58 countries we export to internationally. The dashboard also has a world map that lights up these regions according to an hourly update linked to our sales. If our sales are on target the region lights up green, if they are within 10% of the goal they are shown as yellow, and if they are behind that they show red. This quick visualisation allows us to react and target certain areas to keep our sales on track.

Q: You recently secured a $20 million loan to expand production facilities; how did you choose the bank?

A: We’re expanding our capacity by 50%, because we’re growing by 20% to 30% annually. So we needed financing to expand our volume to maintain our growth in the following years.

We do business with a number of banks, including foreign banks such as HSBC, ANZ, and DBS, but we found that BII (owned by Maybank) was more flexible in terms of relationship and accommodating to our needs. They sent a great relationship manager who really understood our business and was able to offer us the best terms for our business.  

We took a lot of meetings, had a lot of discussions, and considered everything. Eventually we decided based on three things: the rate, the processing time, and the people.

We took the loan out in both dollars and rupiah. We had the standby letter of credit portion in US dollars and some of the term loans in rupiah. About $15 million of that was investment, and around $5 million was working capital.

Q: How did you choose the lender in this case?

A:  First of all it was the rate, then the lowest provision percentage. But what we found is that foreign banks initial rate offer was lower than BIS, but after negotiation, conditions and fees counted in, the loans were actually more expensive.

I’d advise my peers not to conclude that the bank is the best just by the initial rate offer. Sometimes what looks to be a higher rate can end up costing you less after conditions, process, and fees.

So yes, the rate is the first criteria, but the process is also important. The relationship manager and even the top management are important. We always meet with them to learn how they think and how they service their customers.  

Q: You’ve noted that a proud accomplishment in your career was a tax saving of $200,000 for one of your previous companies. How did you accomplish it?

A: Basically we had previously looked at companies within the group separately. But what we decided to look at the company profit plans and business plans over the next five years in relation to its subsidiaries.

When we started to look at two or three companies all together we started to see how we could optimise our tax payments. We knew exactly how much we were paying on VAT; and exactly how much we were paying in withholding tax and so on. Then we looked at what we could do to minimise this.

Because one of our subsidiaries was a tax-loss carried forward company, so we tried to find ways to use that. At arm’s length, we utilised transfer pricing so that the tax loss company going forward could absorb more profit from us, which leveled our tax and altogether the company paid less tax as a group.

Q: Did you develop this strategy internally or did the idea come from consulting?

A: Actually the original concept came from PwC, but we worked out the details and did the hard work internally.

Q: What advice do you have for your peers in corporate finance and in Indonesia in particular?

A: What’s important is improving pricing and cost structures. I found ways we could improve the company bottom line by understanding a company’s cost structure. When we’re dealing with suppliers and negotiating prices, we knew what their biggest costs were. We really pick our suppliers based on what their big ticket items are, so when we negotiate costs we can start from there.

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