Insight

Issue 1: Unlock trapped cash in your cash flow

KPMG insight on working capital optimization

Scott Rankin

Scott Rankin

Principal and the US Strategy Service Line Leader, KPMG LLP

+1 617-988-1474

David Roszmann

David Roszmann

Principal, Corporate Strategy, KPMG US

+1 858-956-9160

Analisa DeHaro

Analisa DeHaro

Principal, Strategy, Working Capital, KPMG US

+1 408-390-4784

Arnold Sanchez

Arnold Sanchez

Director Advisory, Strategy, KPMG US

+1 312-665-1000

Florian Lindstaedt

Florian Lindstaedt

Director Advisory, Strategy, KPMG LLP

+1 832-491-8176

To optimize working capital for improved cash management, companies need to pair data insights from operational metrics with a cash culture driven by top executives.

KPMG C-Suite Perspectives - Unlock trapped cash in your cash flow

KPMG insight on working capital optimization

Audio Transcript

KPMG Elevate C-suite perspectives

Fortify your transformation efforts with essential perspectives, margin improvement

Issue one: Unlock trapped cash in your cash flow

KPMG insight on working capital optimization

The problem during the early days of the COVID-19 outbreak many companies were suddenly forced to find ways to maximize their working capital but as life slowly returns to normal companies now have the opportunity to turn working capital management into a competitive advantage by taking a more strategic approach.
The fact is many organizations aren't fully optimizing their cash flow as a result they are leaving a lot of money on the table that can be used to enhance their operations.
This shortcoming is due to two factors:

  • Limited visibility into working capital metrics
  • A lack of centralized managerial accountability.

Most companies only use metrics that don't drill down deep enough to reveal operational issues impacting performance.
This prevents them from formulating specific actions needed to improve performance determine how to prioritize them or set specific targets many organizations also haven't designated a senior executive to take the ultimate responsibility for working capital performance without centralized ownership however efforts to drive action often lead to competing priorities and sub-optimal results.

What you can do to optimize working capital for improved cash management?

Companies need to pair data insights from operational metrics with a cash culture driven by top executives on which operational metrics to use consider:

  1. Accessibility to core information and the level of effort to obtain actionable insights
  2. Ability to analyze data by business unit region or rather meaningful grouping
  3. Ability to quantify and prioritize drivers for improvement and impact to the organization on assigning well-defined ownership of working capital management with appropriate incentives consider:
    • Gaining executive level support to build cash flow inclusive incentives as a part of the corporate culture
    • Setting targets using cross-functional inputs e.g. finance procurement sales supply chain
    • Linking incentives to overall improvement targets and business objectives

Our strategy team members conducted a survey of more than 200 companies on their existing approaches to working capital management.
They then identified how and why companies were failing to capture opportunities to create value to learn how you can elevate working capital management for strategic advantage. Please download the KPMG report Cash in: Getting more out of your working capital.


 

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