Improving liquidity and working capital

In Turnaround and Restructuring Strategy

Dynamic and disrupted markets, geopolitical uncertainty and ever-growing corporate transparency are putting increasing pressure on companies’ liquidity and cash flows. We help companies forecast, monitor and free up cash via robust, actionable methodologies.

What EY can do for you 

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 and creates cash flow. This in turn supports strategic capital allocation goals and improves commercial and operational performance.

We have experience supporting the complete spectrum of companies, be it a successful business seeking to enhance shareholder value, or an organisation experiencing a cash crisis. We help develop the three main ingredients of strong working capital management: identification of cash generating opportunities, cash flow forecasting, and visibility and control through our advanced data analytics techniques.

Strong liquidity and working capital management:

1. Improves the perception of your business          
  • Demonstrating effective management
  • Proving the quality of earnings
  • Underpinning valuation (while guarding against takeover)
2. Creates cash flow
  • Releasing cash from the balance sheet (the 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
3. 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

How we can help 

We have a track record of identifying cash generation opportunities of between 5% and 15% of annual revenues. Our global network has delivered more than US$40 billion of increased cash flow for our clients over the last 10 years.

We have experience of building and analysing cash flow forecasts to either clarify short-term liquidity requirements or help navigate medium- to long-term fund flows.

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.

  • Cash flow generation

    • Improve cash flow management and reduce liquidity risk through a comprehensive working capital management strategy 
    • Release cash from the balance sheet and improve working capital for investment in acquisitions, market expansion, innovation, and/or business transformations
    • Support value protection through rapid cash generation where there is an event driven, short-term liquidity need
    • Evidence strong grip and control to potential investors
    • Identify and drive additional value from deal activity
    • Employ the cheapest form of financing available by managing cash flow effectively, and de-leverage the business
  • Improved operational performance

    • Drive more efficient processes by adopting leading practice cash management solutions across the supplier and customer base, in turn improving working capital
    • Help ensure that supply chains are resilient, through robust risk policies, alternative sourcing, and enhanced visibility across the cash conversion cycle
    • Make impactful working capital management decisions based on a broad working capital strategy
  • Cash culture and sustainability

    • Help ensure that cash and liquidity management remain a strategic focus, with the entire organization engaged and incentivized to drive improvement
    • Create discipline through cash flow forecasting, with broad cash flow controls and evaluation processes in place
    • Promote global liquidity and cash management maturity across the organization
  • Stronger market perception

    • Gain more insight into managing cash flow to support quality of earnings and underpin company valuation
    • Improve relationships with customers and suppliers through more effective processes and performance monitoring
    • Build confidence in financing relationships through improved liquidity management and ability to meet debt covenants
  • Navigating cash and liquidity constraints

    • Strengthen short term cash flow forecasting disciplines and tools to support near-term visibility and control over cash
    • Use medium-term liquidity forecasting to understand headroom, liquidity events and funding challenges  
    • Utilize focused cash release initiatives to drive additional cash flow and improve forecast cash profile
    • Employ effective stakeholder management around the group’s overall cash position (board, lenders, investors, etc.)
Results

The global EY network of member firms has facilitated more than US$100 billion of increased cash flow for our clients over the past 10 years. We have experience in building and analyzing cash flow forecasts to either clarify short-term liquidity requirements or help navigate medium- to long-term fund flows.

We leave businesses with a revised cash culture and focus embedded into their governance and operating structures, with the tools, metrics and training required to drive continuous improvement.

Contact our liquidity and working capital consultants to support your business

Talk to one of our professionals about how we can support you during COVID-19.

Contact us