For any organization, improving working capital management can have a direct and remarkable impact on value creation: free up cash, accelerate cash flow from operations and increase return on investment. This can lead to significant shareholder returns. In fact, for every $1B in revenue, working capital optimization can result in $20-60M annual benefit and 5,000 analyst hours returned.
However, there’s a misconception that effectively managing working capital is simple: extend supply payments, reel in customer payment time frames, minimize inventory, and maximize inventory turns. Unfortunately, it’s just not that easy as there are many risks involved.
Measuring the components of working capital in a way that’s actionable is a major challenge for many organizations. It also requires different information at various levels within a company:
- Executives want high level metrics to measure against annual operating plans and forecasts;
- Divisional management want more granular information to track their working capital performance targets;
- Business analysts require even more detailed metrics to pinpoint inefficiencies and recommend specific corrective actions.
For many businesses, accessing this information in a consolidated information system and a format that is easy to understand – while also supporting detailed analysis – is a major obstacle.
Managing working capital can free up cash that’s currently tied up in receivables and inventory, or being paid too quickly to suppliers who are unwilling or unable to extend more favorable payment terms. By better optimizing working capital requirements, you can also accelerate cash flows by reducing the cash-to-supplier to cash-from-customer cycle time.
In our latest white paper, we examine the key challenges for measuring working capital components and actionable metrics to yield savings, including how to:
- Minimize net working capital requirements without jeopardizing customer and supplier relationships or supply chain performance;
- Pinpoint key areas of opportunity with a consolidated information system that’s easy to understand;
- Hone in on specific working capital metrics and achieve double-digit percentage improvements in Days Sales Outstanding (DSO) accounts receivables, Days Sales in Inventory (DSI), category margin improvement.
Download our white paper [Download not found] to learn how your organization can overcome the challenges of measuring working capital components in an actionable way—and positively impact your ROI.