Liquidity and working capital improvement

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The old adage that “Cash is King” is more relevant today than ever. Dynamic and disrupted markets, geopolitical uncertainty and ever growing corporate transparency are putting increasing pressure on companies’ liquidity and cash flows. Many management teams struggle to sustain good control over short term cash flows and the working capital that drives them, leaving the business vulnerable to market and operational change.

Strong liquidity and working capital management

  • Improves the perception of a business
    • Demonstrating effective management
    • Proving the quality of earnings
    • Underpinning valuation (whilst guarding against takeover)
  • Creates cash flow
    • Releasing cash from the balance sheet (cheapest form of finance)
    • Creating capacity in tough markets
    • Creating investment capacity: acquisitions, new markets, marketing, training, innovation and other transformation
    • De-leveraging the business or improving shareholder yield
  • Improves commercial and operational performance
    • Building proximity to customers and suppliers
    • Improving commercial thinking across functions
    • Driving more effective processes
    • Identifying and managing risks quicker

Common challenges

  • An urgent need to release cash flow to improve the net debt, ensure covenant compliance or create liquidity to trade
  • Inaccurate cash flow forecasts leading to missed cash flow commitments or excess cash buffers across the business
  • Under-performance in key working capital and cash conversion metrics compared to peers
  • Increasing working capital needs driven by business growth or expansion into new markets
  • High levels of overdue receivables and bad debt write offs
  • Commercial pressure on payment terms from customers and/or suppliers
  • Inability to sustain working capital improvements over a number of years
  • Excess inventory levels, high warehousing cost and growing stock provisions
  • Stock outs resulting from inadequate Sales Operations and Planning (S&OP) process and poor stock visibility
  • Poor levels of customer service and On Time In Full (OTIF)
  • Lack of visibility on cash and working capital performance across the organisation and across the entire working capital cycle

How we can help

We have experience supporting the complete spectrum of companies, whether a successful business seeking to enhance shareholder value, or an organisation experiencing a cash crisis. We help them develop the three main ingredients of strong working capital management:

  • Working capital management: We have a track record identifying cash generation opportunities of between 5% and 15% of annual revenues. Our global practice has delivered more than US$40bn of increased cash flow for our clients over the last 10 years.
  • Cash flow forecasting: We have experience building and analysing cash flow forecasts to either clarify short term liquidity requirements or help navigate medium to long-term fund flows.
  • Visibility and control: We use a wide range of analytical techniques to rapidly identify drivers of opportunity and areas for further focus, including using interactive digital visualisations. Our analytics identify, evaluate and communicate key issues to management and the wider business, and can be provided on an ongoing basis, hosted and managed by us.