Friday 5th July, 2013

A leading report on working captial by EY - Working Capital Management: All Tied Up, has highlighted that the leading 2,000 US and European companies have up to $1.3 trillion of cash unnecessarily tied up - in fact almost 7% of their combined sales. As EY says, during 2012, measuring “true” progress in WC performance may have been made more difficult by the impact of rapidly changing global economic and financial conditions. However, a close analysis reveals major variations both in WC trends and also in the degree of change achieved by different participants in each regional industry.

Leading perfomers, for example, have continued to make major strides in improving WC management. They’ve done this by taking a numbers of steps, including:

• Streamlining their supply chains
• Managing payment terms more effectively with customers and suppliers
• Collaborating more closely with each of the partners in the “extended enterprise”
• Globalising procurement
• Tailoring their WC strategies to emerging markets conditions
• Enhancing their risk management policies
• Changing internal behaviour

In contrast, many poorer-performing companies still fail to address the “root and branch” aspects of WC policies, processes and metrics. They tend to focus on short-term actions rather than more substantial and sustainable operational and structural changes.