Disrupted markets, geopolitical uncertainty, and ever-growing corporate transparency are putting increasing pressure on companies’ liquidity and cash flows. The saying that “cash is king” is more relevant today than ever.
Growing businesses need cash to fund everything, from acquisitions and R&D to working capital itself. Meanwhile, working capital is the cheapest source of finance: companies have the opportunity to take control of their own finances rather than going to the external market.
However, many management teams struggle to maintain good control over short-term cash flows and the working capital which drives them, leaving them vulnerable to market and operational changes. Having clarity and insight into your overall working capital structure and performance drivers can help create additional value.
Some of the common challenges we hear from our clients are:
Business growth driving increased working capital and additional funding requirements.
Weak controls in setting and managing payment terms with customers and suppliers.
High levels of overdue receivables and bad debt write-offs.
Lack of cash awareness across geographies and divisions, with inadequate or no working capital targets and incentives.
Lack of visibility of both cash and working capital performance and entire working capital cycle across the organisation and subsidiaries.
Difficulties in managing the trade-offs between cash, cost and service.
Sub-optimal sales operations and planning process and poor levels of customer service.
We have experience supporting the complete range of companies, whether a successful organisation seeking to enhance shareholder value or a business experiencing a cash crisis.
Releasing working capital can be an important generator of returns to owners or a source of funding for growth. We work with our clients, usually management teams, to improve working capital, liquidity and cash flow management.
We use our considerable experience to help clients improve processes and unlock funds or cash, particularly those with multiple business units spread across many geographies. We have experience in helping companies identify opportunities to release cash and then successfully execute the working capital release plan.
We can apply a diagnostic which focuses on accounts payable, inventory, accounts receivable and other working capital items through qualitative and quantitative methods, including:
Analysis: in-depth analysis of transaction-level data and interviews across various functions and departments.
Diagnostic: validate performance drivers, establish targets and develop insights for improvements to identify ‘quick wins’ and longer-term working capital improvement opportunities.
Gap analysis: review of existing policies and processes to identify gaps to leading processes, and comparison of current performance to international best practices.
Benefit potential: completing a working capital benchmarking exercise to compare performance against peers and quantify benefit opportunity.
Action plan: findings and recommendations report with detailed action plans for implementation to generate cash and make sustainable improvements.
Process optimisation: process mapping and improvement for inventory reduction, purchase to pay and order to cash processes.
Terms improvement: identification and improvement of commercial terms, and ongoing compliance and monitoring.
Cultural change: creation and embedding of a ‘cash culture’ within the organisation, evaluating and optimising trade-offs between cash, cost and service.
If you would like to learn more about our capabilities and experience, please contact our Financial Advisory team.
We have a track record of identifying cash generation opportunities of between 5% and 10% of annual revenues. Our international network has delivered more than US$XX billion of increased cash flow for our clients over the last 20 years.
Selected examples include:
Receivables reduction: targeted reduction programme for a packaging company across Austria, Germany, Hungary, Slovenia and the Czech Republic, including workshops and training, action plans and remote follow-up to reduce receivables by €4.4m.
Payables: high-level review of the payables and payment process for a global steel company to assess the savings potential in non-core spend through inventory and receivables reduction, and generate cost reduction and process improvement. Identification of potential cash-flow saving of €4.1m, and possible 30% increase in invoice processing efficiency.
Receivables corporate reporting: development of a global corporate reporting process to support financial analysis and reduction of accounts receivable for a leading telecoms operator. The project acted as the pre-cursor to a global asset management and working capital initiative.
Supply chain: review of stock and inventory for a global steel company with a view to reducing working capital by 20%. Analysis of finished goods, work in process, raw materials, and stock replenishment identified potential improvements in cash-flow of €6.4m.
Receivables dispute management: redesign of financial processes governing receivables, credit policy, communication between Finance and Sales, and new dispute management process and system for an international security company. Reduced disputes from 1,250 to 200 over 4 months.
Receivables securitisation: implementation of a receivables programme for a credit line of €500m for a leading telecoms equipment provider, involving the selection of technology platform, bank negotiations, change management, the provision of financial data, and tax and legal implications.
Want to learn more about how we can help you grow?
Henderton acts as independent, trusted advisors to innovative companies throughout their growth lifecycle.
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