Summary: Companies in both the US and Europe managed to improve working capital (WC) performance in 2010 compared with 2009, with cash-to-cash (C2C) dropping by 2% and 4%, respectively, according to EY’s latest Annual Working Capital Management Survey. The level of improvement, however, remained limited.
The US regained only a fraction of the ground lost in the prior year, while Europe returned to a level of performance that was marginally better than in 2008. A more detailed analysis also indicates varying and diverging trends among companies, industries and countries and within each area of WC.
Going forward, businesses face considerable headwinds in WC management. The levels of cash tied up in WC will increase to support heightened business activity and improved prospects. The lag effect of higher commodity prices on business operations suggests a much greater impact on WC performance in 2011 than in 2010.
With so many global economic and financial market challenges remaining unaddressed, compounded by recent commodity price developments, it is therefore critical for companies to continue implementing truly effective WC management strategies.
This year’s analysis shows that the surveyed companies still have an aggregate total of up to US$1.1 trillion in cash unnecessarily tied up in WC. This is equivalent to nearly 7% of their sales, a figure that is similar to last year’s.
Learn more about this year’s working capital analysis:
- Working capital survey results
- Company and industry performance review
- Regional and country performance review
- Opportunity for improvement