Cash in the bank?

Working Capital Optimization

Working capital is one of the most significant investments a business can make. It can also be one of the least efficient. In profitable businesses, this inefficiency is often hidden. But when times are tough, poor working capital management may lead to a company becoming financially stressed or distressed.

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Working capital becomes a top priority when a business needs cash to invest in other areas. Common triggers of liquidity issues include: acquisitions, required investments for growth, and temporary downturns in business performance. Working capital optimization frees up cash to invest elsewhere in the business, pay down debt, or return to investors.

Sustainable improvement in working capital performance requires a ‘cash mindset’, which can be a major challenge, especially for organizations that have been focusing on revenue and margin growth. Pursuing a balanced business agenda that covers all three areas - cash, revenue and profitability – requires careful management of trade-offs. To achieve the optimum level of working capital, a company must understand the scope of the effort, identify what steps need to be taken, and then implement those actions in a constructive, collaborative, and coordinated manner.

Deloitte professionals can help identify and release cash tied up in working capital.