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Services

Manage Working Capital to unlock liquidity for your business

Explore how we have helped clients enhance their processes through broad measures and the approach we take to help them manage cash flow.

Working with a multitude of large and small clients across various industries, Deloitte’s Cash & Working Capital team is at the forefront of advising such clients on the importance of effectively and methodically approaching working capital. We may assist your organization to enhance its working capital processes by:

  • Reviewing historical and current performance for the order-to-cash (O2C), procure-to-pay (P2P), and forecast-to-fulfill (F2F) cycles; to identify key trends, patterns and areas for improvement.
  • Benchmarking your organization’s working capital metrics against a comparable set of peers for all cycles; to identify best practices and best-in-class measures that could be deployed to improve your business.
  • Reaching deeper into your business to engage with operational teams and key stakeholder to better align liquidity needs.
  • Forecasting working capital levels and the impacts of seasonal needs and market changes.

Efficient working capital levels ensure you are only investing what is needed to meet short term obligations and not tying up valuable resources that can help improve your business.

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LiquidityIQTM

Across various industries, our team has leveraged data analytics, developed proprietary technology, and collaborated with technology solutions to develop deeper insights to process transactional data for driving working capital improvement.

Learn how we utilize LiquidityIQ to develop insights that can help optimize working capital.

Success stories

Future of Work: Ways of working in uncertain times

Global Fortune 100 logistics company

A Fortune 100 transportation services company with declining days sales outstanding (DSO) and days payable outstanding (DPO) metrics over the last few years recognized an opportunity to improve its O2C and P2P processes to drive cash benefits in order to reduce debt, lower interest costs, and fund growth. An initial assessment identified more than $1 billion in working capital opportunities, and Deloitte’s Cash & Working Capital team worked closely with the client on numerous pilot programs to help it implement leading practices across the O2C and P2P cycles.

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A $60 million US software as a service (SaaS) company

A $60 million US SaaS company, owned by a private equity firm, was in the process of combining five different acquired businesses into one organization. Deloitte performed the working capital assessment and subsequent implementation phases across the O2C and P2P cycles and leveraged tactical and customized tools, templates, checklists, and reporting metrics to assist the company’s team in executing process improvement initiatives. We helped establish weekly “Cash Council” calls to discuss key performance indicators (KPIs), progress, and follow-up action plans. $5.4 million in total working capital improvement opportunities were identified, $3.9 million for O2C and $1.5 million for P2P. A total of $2.8 million was realized from the opportunities identified over three months.

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Multinational specialty manufacturer

A $2 billion multinational specialty manufacturer of electronic devices was facing working capital challenges due to the decentralized nature of its organization. Reporting processes and data were not centralized, limiting management’s visibility for effective sales and operational planning and its ability to make structural improvements for material requirement planning and inventory management. We improved the sales forecast to production planning by unit to improve forecast accuracy and identified and cleaned up slow and obsolete inventory. A total of $42 million was realized over four months.

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Key issues by working capital cycle

Order to cash (O2C) Forecast to fulfill (F2F) Procure to pay (P2P)
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A high DSO is a matter of concern

There are several key reasons for underperformance in this customer-facing cycle. DSO challenges may start with the first interaction with a new customer by the sales team. At times, to finalize a deal, a sales team will offer extended payment, which may have unintended consequences—such as a significant reduction in operating cash, which increases the need to borrow to maintain liquidity and increase expense. Processing errors cause customers to pay some or all of their invoices substantially slower or not at all. A lack of cohesive strategy in which a company fails to make improvement in its processes experiences increased staffing costs, suffers disproportional cash collections delays, and has a much higher bad debt expense.

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How much inventory is too much?

Inventory management and capacity planning usually stand on the opposite ends of the same equation. While inventory management strives for the right level of inventory to service the customer while protecting cash, the main goal for capacity planning is efficiency. This means increasing production, workforce, and equipment utilization, which may be achieved only through larger production batches, long production runs, lower changeover frequency, and optimized product sequencing. All of these factors may contribute to excess and potentially obsolete inventory and suboptimal service levels.

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The chase after the purchase

An organization should have a strategy (1) to obtain better terms from its vendors and (2) to determine the appropriate time to extend payments. It is common to come across challenges in obtaining internal alignment on payment terms strategy, such as allowing a wide range of payment terms and not adhering to these terms regardless of status. Additionally, nearly every organization struggles with delayed accurate purchase orders, lack of visibility of goods received, and an overall lack of observance of the process through early, incorrect, duplicate, and missed payments. Each day a purchase order is delayed may equate to millions of dollars lost.

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Approach

  • Perform scenario analyses to identify the critical drivers of performance
  • Identify opportunities based on root-cause analysis
  • Define improvement initiatives, outlining rationale, key activities, and risks
  • Define and launch quick wins
  • Finalize and refine a road map in differentiating tactical improvements and strategic investments
  • Decide on structural changes in WC based on the prioritization of initiatives and the road map
  • Address WC ownership and governance
  • Set up a benefits tracking tool and/or a WC dashboard for KPIs, information requests, and reporting
  • Secure ownership of changes in WC management
  • Track the progress of initiative rollout teams
  • Understand learning points and assess possibilities for ongoing improvements

By freeing trapped cash on the balance sheet through working capital improvements, companies can fuel growth, pay down debt, or return capital to shareholders.

—Anthony Jackson, Principal, Deloitte Transactions and Business Analytics LLP

Explore our insights on how to improve working capital and liquidity

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Managing liquidity before inflation heats up
A company can create strategic advantages by actively managing its working capital and being prepared for disruptions or challenges, such as inflation, in the economic environment. The benefits of having a strong cash management foundation are many.
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Explore the benefits
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Creating value through working capital
The right people, processes, and systems can create a culture that improves WC performance and frees up capital. Now is a great time to unlock cash.
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Discover why
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Beware of the working capital safety net
Regardless of where an organization sits in its response to COVID-19, effectively managing working capital will likely continue to be paramount for finance and other leaders as the uncertainty persists around the pandemic’s continuing impact on liquidity. Could government stimulus be creating a false sense of security?
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Learn more
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Strategies to counter supplier risk, preserve cash
As the uncertainty around the impact of the novel coronavirus persists, so does the heightened awareness about working capital management. Unlocking working capital now is an immediate priority critical to survival.
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Here’s why
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Don’t wait for a liquidity crisis to scrutinize cash
A strong focus on liquidity often drives the development of processes, controls, and tools that can enhance cash flow and support good business decisions in any economic cycle. Companies need a strong understanding of liquidity to make sound decisions.
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Pay attention to cash flow
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Optimize working capital to strengthen cash positions
With a focused effort on sharpening working capital, organizations can tap into the most inexpensive investment capital available.
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Proactive approach to optimizing work capital
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Rework culture to fortify working capital processes
To optimally manage working capital, collaboration among its many stewards and influencers is critical. Aligning incentives with goals can help build a culture that promotes continual diligence.
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Methods to manage working capital

Our team

Anthony J. Jackson

Anthony J. Jackson

Deloitte Transactions and Business Analytics LLP

+1 214 632 6658

Anthony Jackson has more than 20 years’ experience advising clients on debt restructuring, working capital improvements, vendor diligence, liquidity and cash flow modeling, store closure analysis, con... More

Wanya du Preez

Wanya du Preez

Managing Director | Deloitte Transactions & Business Analytics LLP

+1 703 251 1107

Wanya is a managing director in Deloitte Transactions and Business Analytics LLP’s Value Creation Services team, with more than 15 years of professional experience in serving clients in South Africa, ... More

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