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Working Capital Optimization: An Enterprise Approach

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Pressure on top line revenue and illiquidity in credit markets continue to put the spotlight on working capital management.  Often times working capital is managed via a siloed approach in the areas of accounts payable and accounts receivable rather than utilizing an enterprise approach which considers multiples facets of working capital.

I would like to share a presentation where I explore how working capital enhancements can be realized via an enterprise approach through improved working capital visibility, internal process evaluation, and collaboration across the business enterprise. I hope you find this presentation useful and that this post generates some discussion around taking an enterprise approach to working capital management.

Reference URL: https://www.proformative.com/og/resource/general-content/working-capital-optimization-enterprise-approach

Answers

Ken Kaufman
Title: CFO
Company: Community Dental Partners
LinkedIn Profile
(CFO, Community Dental Partners) |

Ernie,

These are great thoughts. Thanks for sharing.

I have found a lot of success in this area by mapping out for different departments in the company the cash, or working capital, cycle of running a business. The employees usually have no idea how long it takes to turn their activities into cash to sustain the business. When it comes to internal process evaluation and improvements, this is usually an effective way to get others to buy into the concept.

Also, I wrote a blog post in which I discuss using the working capital days ratio to have an enterprise-level method for tracking all of the moving parts of working capital. I have found some success with this tool as well. The blog post is at: http://www.cfowise.com/part-time-cfo/2-reasons-working-capital-is-so-misunderstood/.

Thanks again for your thoughts on this!

Mark Von Der Linn
Title: Principal
Company: www.VDLconsulting.com
(Principal, www.VDLconsulting.com) |

Certainly this approach makes sense. I gravitate toward the process improvement aspects of it because I specialize in it, but more so because it's so commonly overlooked. There are huge savings opportunities, for example, in efforts as simple as applying better administrative practices to areas like IT & Telecom (such as TEM solutions for bigger companies). Cellular optimization has huge savings potential, as high as 50%. Consider similar opportunities such as lighting replacement and power management. Some don't even require up front investment.

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