Due to the current economic downturn these days medium-sized enterprises are often challenged by the fact that more and more of their assets are tied up to the working capital.
Frequent effects:
- An overall bad payment behaviour causes high capital lockup in debt claims
- High stock levels as a result of deficient planning and poor communication along the supply chain
- Low liabilities as a result of insufficient purchasing processes
A simple business case shows what impact efficient working capital management can have:
An industrial company with a sales volume of approximately € 800 million and about 70 sales days of working capital ties up approximately € 153 million. If the company succeeds in reducing the duration of the capital lockup by only 5 days this will lead to release about € 11 million. Apart from this unique availability effect there will be a sustainable financial effect, too, depending on the level of weighted average cost of capital.
Decreasing the capital lockup time by only 5 days will lead to releasing around € 11 million. Apart from this unique effect on liquidity a sustainable financial effect will be generated as well, depending on the level of the weighted average cost of capital
candidus´ expertise
candidus supports companies designing and implementing in all three areas of working capital management in order to increase solvency and ultimately also to raise return on equity.
Debtors Management (accounts receivable)
- Composing a segmentation of customers and integrating it into processes
- Improving and standardising company-wide payment targets
- Reducing outstanding accounts through adjustment of processes
Inventory Management
- Implementing and/or improving forecasting processes (reference: interaction of distribution and manufacturing)
- Improving processes along the operational value-added chain
- Designing and implementing lean manufacturing-methods
Creditors Management (accounts payable)
- Implementing a segmentation of suppliers and adjusting purchasing processes
- Improving and standardising company-wide payment targets
- Synchronising company-wide payment cycles
All this is not only affecting the overall company key data in a positive way but it also generates an increase in sales coming from higher customer satisfaction.
