Press release

Diverging working capital trends between the US and Europe

London, 26 June 2013

  • Share
EY - View the online version
EY - Download the PDF

The results for companies’ working capital (WC) performance in 2012 show diverging trends between the US and Europe, with cash-to-cash (C2C) increasing by 2% in the US from its level of 2011, while dropping by 4% in Europe over the same period. For the US, these headline results almost wiped out the gains achieved in the previous year. In contrast, Europe reported significantly improved WC performance after a stable outcome the year before, according to All tied up 2013, Ernst & Young’s annual working capital management survey, released today. 

US$1.3 trillion still unnecessarily tied up in working capital among leading US and European companies

This year’s survey focuses on the WC performance of the top 2,000 companies in the US and Europe. It also provides insights into the WC performance of another 2,000 companies in seven other regions and countries. In addition, it sets out the findings of a review comparing the WC performance of small and medium-sized enterprises (SMEs) with that of large companies. 

US and Europe

For the US, the deterioration in WC performance in 2012 resulted from poor results in both inventory and receivables (days sales outstanding (DIO) and days sales outstanding (DSO) were up 3% and 1%, respectively), partly offset by a better showing in payables (days payable outstanding (DPO) was up 2%). For Europe, the stronger WC performance was driven by progress in both receivables and inventory (DSO and DIO were down 4% and 2%, respectively), partly offset by a poor showing in payables (DPO was down 3%).

Compared with 2011, sales growth slowed to 3% in the US and 6% in Europe in 2012. But while sales in the US grew at a similar rate in the final quarter of the year compared with the full year 2012, Europe saw a significant decline in sales growth toward the end of the year, as much of the region fell back into recession.

Jon Morris, Ernst & Young’s Head of Working Capital Management for Europe, Middle East, India and Africa says: “For Europe, this trend means that much of the reported WC improvement appears to have come from much lower sales and therefore purchases in the last months of the year, resulting in reduced balances of both receivables and payables.

“However, many companies in both regions have also continued to pursue new initiatives in the area of WC, especially with regard to lean manufacturing, billing and cash collection, spend consolidation, low-cost country sourcing, renegotiation of payment terms, and supply chain efficiency.”

Performance by sector

In 2012, there were wide divergences in the WC performance of various industries across and within regions, partly reflecting the impact of contrasting economic growth patterns and changes in exchange rates during the year.

Automotive suppliers in the US reported significantly higher C2C, while their European peers still managed to reduce C2C. Among non-cyclical industries, pharmaceutical companies in the US reported higher C2C, while those in Europe posted lower C2C. For the oil and gas industry, changes in exchange rates between the US dollar and the euro played a significant part in explaining the variations in WC performance between the two regions.

European country performance comparisons

Of the seven main sub-regions and countries in Europe, the UK was the only one reporting worse WC results in 2012 compared with 2011. Its C2C increased by 4%, wiping out the entire gain registered in the year before when the country significantly outperformed its peers. In contrast, France (6% drop in C2C), Germany (4% drop), Benelux (6% drop) and Nordic (7% drop) countries managed to report a solid improvement in WC performance.

Improving working capital management – US$1.3t still tied up

The wide variations in WC performance between different companies in each regional industry point to significant potential for improvement — with up to US$1.3t of cash unnecessarily tied up in WC of the leading 2,000 US and European companies. The report’s “cash potential” analysis reveals that the opportunity is distributed across the various types of WC components, with 35% coming from each of receivables and payables and 30% from inventory.

Other regions and countries

Companies in other regions and countries scored poorly in 2012, with overall C2C increasing by 3% (and by 4% excluding the oil & gas and metals and mining industries). Last year’s weak WC performance was due to poor results in receivables and inventories, partly offset by a better showing in payables.

In 2012, five regions and countries out of seven posted a deterioration in WC performance. Only two regions (Australia and New Zealand, and Latin America) reported better results.

SMEs and large companies

SMEs further narrowed the WC gap with large companies in 2012, meaning that the WC gap between both sub-groups have been tightening since 2005.

Steve Payne, Ernst & Young’s Head of Working Capital Management for the Americas, says:

“SMEs still display much larger C2C than their larger counterparts. Analysis shows that scale provides large companies with the ability to negotiate favorable payment terms with customers and suppliers.”


Morris concludes: “Now’s the time for companies to challenge their working capital performance and seek effective strategies to free up excess cash from the balance sheet to reduce net debt, fund growth or business transformation or even return value to shareholders. 

“Many companies only really focus on working capital metrics at key reporting periods such as quarter and year-end and miss out on huge potential cash gains by getting into a monthly or even weekly rhythm.”


About the survey

The report contains the findings of a review of the WC performance of the largest 4,000 companies (by sales) headquartered in the US (consisting of 1,000 companies), Europe (1,000) and seven other main regions and countries — Asia (600); Australia & New Zealand (100); Canada (300); Central and Eastern Europe (150); India (400); Japan (230); and Latin America (270). 

The overall analysis draws on companies’ latest fiscal 2012 reports. Performance comparisons have been made with 2011 and with the previous nine years in the case of the US and Europe and seven years for SMEs and large companies. 

About Ernst & Young

Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 167,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.

Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit

This news release has been issued by EYGM Limited, a member of the global Ernst & Young organization that also does not provide any services to clients.