Working Capital Optimization

Time is money and you have cash tied to your day-to-day operations. Finance your growth or strategic development initiatives by releasing cash from your own operations instead of using external financing. We help you to improve your profitability and release cash from the balance sheet by optimizing your working capital.

Working capital optimization is a cross-functional effort of the entire organization. By improving visibility to the key operative processes, waste and delays can be eliminated – may that be shortening lead times, optimizing the inventory levels to better match the demand or extending the time suppliers are paid. All in all, these actions aim to reduce the time you have money tied to the operations and having the cash in the bank account faster.

Improving cash flow by optimizing working capital is an organization wide cultural transformation that – when executed properly – leads to sustainable results and also enables future improvement of your profitability.

“As we continue to grow, that 30% released working capital will convert into several million euros less external financing needed. That really puts you thinking. Let alone to mention how much more financing we would need if our relative working capital would start to develop in the wrong direction.“

Merja Rantala, CFO
Pinja

Read case Pinja

Ebook

Learn the basics of how to execute a successful working capital optimization project.

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Increased control over your key operational processes

As working capital is the best indicator of a company’s operational effectiveness, it is related to all your key operative processes. Working capital optimization relies on fact based and transparent understanding of the key process drivers and metrics. Hence, allowing your organization to make informed decisions and putting the focus to where it counts.

Improved capabilities to drive your profitability

Optimized processes rely on cross-functional co-operation with silo breaking mentality, improved knowhow and capabilities to respond to challenges. By strengthening the cash culture in your organization you improve the ability to make decisions that take all perspectives of profitability into account.

Permanently improved cash flow performance

At the end of the day, it is the results that count. Systematic optimization of working capital leads to permanent improvement of your cash flow and profitability. Additionally, the improved processes and transparency allow your organization to respond to changes in your business environment in a more flexible manner.

See what some of our customers say after the working capital optimization project.

See examples of what we actually do with a different kind of working capital related challenges.
Click the plus icon to see symptoms of the challenges, how to solve them, what the impacts are and related customer cases and blog posts.

Challenge #1 Customers are not paying on time

Symptom
High Overdues

Solutions

Creation of global overdue management process
Clarified roles and responsibilities regarding the whole dunning process
Creation of Accounts receivable and overdue reporting

Impacts

Increased collaboration between sales and finance functions lead to improved situational awareness
Amount of overdue payments reduce significantly

Challenge #2 Low focus on supplier payment terms

Symptom
Low Accounts Payable

Solutions

Payment term analysis
Discount and rebate analysis
Payment policy revision
Training of sourcing department and purchasers of indirect services
Creation of “handbook” for purchasers
Structured negotiation of supplier terms

Impacts

Greatly improved Days Paid Outstanding (DPO)
Consolidation of suppliers lead to more streamlined supplier base and, thus, more efficient supplier management

Related blog posts

In English: Underutilized profitability potential lurk in accounts payable
In Finnish: Näin onnistut maksuehtoneuvotteluissa toimittajien kanssa

Challenge #3 Customers demand longer payment terms

Symptom
Rising Accounts Receivable

Solutions

Complete revision of customer credit policy and collection process
Updating contract templates from a cash flow perspective
Creation of an acceptance process for non-standard terms
Creation of credit policy
instructions for sales
Training the new policy and processes to sales and finance organisations

Impacts

Halted the increasing trend in Days Sales Outstanding (DSO)
Improved level of customer credit term management

Challenge #4 Long delays in invoicing the delivered service (especially in maintenance services)

Symptom

High amount of un-invoiced work in progress (WIP) in the balance sheet

Solutions

Invoicing process mapping
Invoicing process redesign
Creating transparency to the invoicing process by selecting the key process phases and defining data needs for those phases
Setting up reporting for all organizational levels

Impacts

Created visibility to the invoicing process and its key phases
Greatly reduced invoicing delay in invoicing process with a road map for future improvements

Challenge #5 Focus on gross margin lead to neglecting the inventory levels in retail business

Symptom
Low inventory turn

Solutions

Training the category managers of inventory turn’s role in total profitability (Earn & Turn)
Creation of visual tools that allow category managers to easily identify the parts of their product portfolio that have below requirement performance
Revision of assortment/portfolio management process with a clear focus on both margin and inventory turn targets

Impacts

Culture change from P&L focus to total profitability
Improved both inventory turn and inventory profitability (Earn & turn)

Challenge #6 Demand signal accuracy is unknown or poor in the manufacturing business

Symptom
High inventories

Solutions

Re-designing the Sales & Operations
Planning process with focus on
mid-to-long demand horizon.
Applying statistical methods in the process to ensure that the best available demand signal is in replenishment.
Improving replenishment timing by ensuring that the demand plan is in line with supply capabilities.

Impacts

Improved cost efficiency & flexibility through better ability to adjust resources
Improved delivery performance
Better stock turn

Challenge #7 Inventory replenishment process not optimized for existing demand in the manufacturing business

Symptom
Stock-outs for high running items and excess inventories for items with low demand

Solutions

Defining delivery model for all items in the portfolio based on their demand behavior
Setting replenishment model for all items in the portfolio based on delivery method selections and supply parameters

Impacts

Improved delivery performance by reducing stock-outs for high runners
Overall healthier inventory structure leads to better stock turn

Read the blog post: How to improve competitiveness by reducing stock-keeping units?

We work hands-on with our customers to build the insights, visibility and tools needed to improve capabilities, empower people and achieve measurable profitability improvement, now and in the future.

We have tested our ways of working in 300+ projects, releasing millions of euros. Read more about our Changemakers toolbox, project framework, and pricing on the How we work -page.

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Capacent Group

Capacent Group

Working Capital Optimization

We help release cash from operations to finance your growth and strategic initiatives by optimizing your working capital.

Release cash for growth and investments

Learn the basics of how to execute a successful working capital optimization project.