The level of your working capital is under control?
In the income statement as it affects the cost of credit that you grant to your customers?
The management of receivables, inventory and suppliers are in line with best practices?
Companies are under increasing pressure to reduce costs due to more aggressive competition in global markets. Therefore, many companies are studying ways to increase its efficiency. In the search for potential improvement, however, should not only examine the income statement but also consider the balance sheet in order to achieve increased efficiency through a better balance of working capital.
The reduction in net working capital, defined as the difference between the operating working capital (accounts receivable and inventories) and operating liabilities (accounts payable), allows not only to increase the free cash flow, thereby increasing the value of the firm, but also reduce operating costs.
The purpose of working capital management professional is to reduce the capital tied up in a lasting way of society. To this end, we must identify the “drivers” of working capital and optimizing business processes corresponding, in order to reduce the stock of currency in the long run.
To help customers optimize the working capital, VFH uses an approach that has proved successful in many projects and can be divided into three phases Diagnostic Assessment & Review, Conception & Design, Implementation.
1. Diagnostic Review & Assessment
The examination of the indices of the isolated society significantly restricts their significance and should make a comparison with the indices of activity through a peer group benchmarking. Are obtained in this way of concrete information on the possibilities of reducing the levels of existing assets at the company, leading to the estimate of the potential benefits in terms of cash generation can be obtained by aligning the best performer rather than the average of the sample.
2. Conception & Design
In accordance with the potential for improvement emerged in the conception and design make a detailed analysis of business processes deemed critical assessment phase, the mapping of the same and the comparison with internal and external best practices. You agree to follow the possible short-term interventions and draw up a project plan that outlines the objectives for each area of action and the allocation of resources.
At this stage it is essential to the consistent implementation of the default and the continuous monitoring of their progress. The decisive factors for success are a project team representative of all areas of the business involved, the definition of a share incentive plan and the identification of a set of monitoring tools to measure for the control of the project.