„Cash is king.“
The well-known term working capital is derived from the difference between current assets and current liabilities. With steadily increasing cost pressure, it is becoming increasingly difficult to achieve set return targets on capital employed.
Liquidity tied up in current assets is often noticeably lacking in the annual result and thus offers enormous potential for releasing capital.
According to estimates, the 1,000 leading European companies alone have a working capital potential of more than 500 billion euros, which is just waiting to be raised.
Best practice companies do not aim to have their entire business financed by their suppliers. Rather, the balance of receivables and payables with an optimal inventory level enables a smooth process based on partnership that optimizes the cash conversion cycle. A clear competitive advantage in increasingly globalized and complex markets.
Typical effects of a working capital optimization are:
- High releasable liquidity in receivables and portfolios
- Significant reduction in payment terms
- Optimized handling of payment processes (especially payables and receivables)
- Increase in profitability
- Release of capital for investments
- Improvement of key performance indicators
- Optimization of internal process flows
- Identification of external factors that burden working capital
- Identification of target/actual deviations in the working capital targets
- Recognition of changes in different reporting segments (region, responsible person, market power, customer/supplier, etc.)