Working capital / cash

Companies need cash to fuel growth. However, companies can often find cash reserves simply by optimizing their working capital. This can be done on three levels: accounts receivable, accounts payable and inventories.

Following a phase of consolidation, companies are focusing on growth strategies once again. For this reason, they need additional financing, which is often hidden in their own working capital. With the right optimization approaches in their core business, companies can free up cash to finance growth. Best practice companies consistently use this method of financing.

To make the best possible use of working capital, core business processes such as order-to-cash (sales, production, logistics/distribution, receivables management) and purchase-to-pay cycles (procurement, incoming goods/invoices, payment) must be comprehensively optimized. To do so, cross-unit approaches are needed that apply the required optimization levers and embed them in the company.

Many approaches to optimizing working capital do not sufficiently address core process chains in their entirety. For this reason, initiatives frequently do not produce the desired success, and valuable potential remains unexploited.

Roland Berger Strategy Consultants recommends a comprehensive approach to optimizing working capital. We make sure that entire core process chains are considered in the optimization strategy. We identify potential and select the right levers for making sustainable working capital improvements. To succeed, the approach must be made a top management priority as cross-divisional coordination is necessary.

Our approach is based on the Cash Navigator finance tool, which helps make the company's entire working capital transparent. Once this has been done, we discuss possible optimization levers with the relevant parties and evaluate potential in terms of realizable benefits and the cost of implementation.

Freeing up EUR 200 million

Our client was a global manufacturer of automotive assembly production systems, who wanted to realize a sustainable reduction of working capital. First, we analyzed the working capital of all global production locations. We then conducted a detailed benchmarking study, which included companies from the same and other industries. The study served to identify potential and translate it into an action program. By implementing the actions defined, our client freed up cash potential of EUR 200 million from the working capital.

Reducing inventory

Our client was a well-known producer of basic materials for the consumer goods industry. The company's product and order complexity led to above-average inventory along the core process chain. To reduce inventory, we conducted a detailed analysis of production planning and orders. Together with our client, we were able to reduce inventories by optimizing planning processes and the product range. We also improved product availability.

Unleashing funds for investment

We worked with our client, a national water utility, to unleash funds for investments by optimizing receivables and inventories. We conducted a detailed analysis of the core processes related to order, service and receivables management. By adjusting down payments and advance payments, improving reminder systems and introducing IT technologies, our client realized cash potential of EUR 150 million.