The Great Debate UK
from Rolfe Winkler:
Well-known to businessmen everywhere, but totally under-appreciated by investors, is the concept of working capital, the day-to-day operating cash flow that makes a business run. Turns out the Red Cross has a big working capital problem when it comes to text message donations. From Carrick Mollenkamp (WSJ), Americans pledge millions, but cash flow takes weeks:
Secretary of State Hillary Clinton, CNN, and users of Twitter Inc. have urged people to punch 90999 and then type in the word "HAITI" on their phones to send $10 to the American Red Cross. But the money won't be routed from most U.S. wireless carriers to relief efforts until cellphone users pay their phone bills.
That could take 30 to 90 days, telecommunications officials estimate, well after the critical initial days in which humanitarian aid organizations are trying to deliver medical supplies, food and water to save injured earthquake victims and help others with their most immediate needs.
To run its operations, the Red Cross needs cash today. But text message donations don't actually come through until users pay their cell phone bills and carriers pass through the funds. (To be clear, I'm not saying text message donations are a bad thing. They're an ingenious way for relief organizations to leverage the billing relationships that carriers have with consumers. I gave $10 myself. Still, it provides a good opportunity to discuss cash flow issues that few understand.)