Working capital reflects the excess of current assets over liabilities, comprising of accounts receivable, inventory minus accounts payable. It represents the liquidity a business requires for day-to-day operations. The working capital requirement should be managed with respect to firm-specific operating conditions exerting broad influences on the operating cycle. Given that operating conditions are outside of management’s control, focus should be brought to the following three fronts.
By focusing on the processes to shorten the cash conversion cycle (payables, receivables & inventory), companies can reduce their working capital requirements by as much as 35 to 40%.
Deloitte developed a structured and collaborative approach consisting of 4 phases which lead to a successful implementation of sustainable working capital optimisation. A pre-configured —and flexible for rapid tailoring to specific company needs— working capital dashboard allows for powerful ‘on-the-fly’ analysis and navigation from top-level overview down to transaction details.