2. Working Capital 3 Major Operational Processes
Balance Sheet Stock
€m (raw materials, WIP and
Fixed assets 1,355
finished goods) Days Inventory
Outstanding
Current assets
+
Stock 315
Debtors 505
Debtors
Current liabilities
Creditors (283) (money owed to us for
Days Sales
our products) Outstanding
Customer discounts/bonus (47)
___
-
Net current assets 537
Other assets and liabilities (35)
Creditors
Cash 263
(money we owe for our
Loans (2,314) purchases) Days Payables
___ Outstanding
Reserves / net assets (194)
___ =
Working capital
requirement
3. Some Working Capital myths….
Perception: Working Capital Reality: Working Capital
... is a finance issue … is an operational issue
... is a balance sheet item … impacts Income statement
... is improved only with systems … is improved with new policies,
implementation or strategic processes and metrics
changes
.. has a negative impact on … improves Customer Service
Customer Service (“collect early, (“pay, deliver, collect to what has
push the products out and pay been negotiated”)
late”…)
.. generates little benefit … can be improved 20-30% by
process optimization
4. The Working Capital Mechanism
Cash Conversion Cycle
Cash
Invoice
Purchasing
collection
Purchase To Pay
Order To Cash
Invoicing Payments
Sales Production
Inventory
5. Working capital can be represented as
a timeline
Order Cash
received received
Forecast to Fulfill Order to Cash
Process (FTF) Process (OTC)
Goods held as stock or WIP Debtors Cycle
Time
Creditors cycle
Purchase to Pay Process (P2P)
Cash
Order Paid out
placed
Cash tied up
As WCAP
6. Provider of working capital
Order Cash
received received
Forecast to Fulfill Order to Cash
Process (FTF) Process (OTC)
Goods held as stock (DIO) Debtors Cycle
Time
Creditors cycle
Cash
Purchase to Pay Process (P2P) Paid out
Order
placed
Working Capital
Provided
7. The Ackinas Working Capital Solution
o Daily monitoring solution for Working Capital and
related ratios
o Single or multiple entity related and back-office
solution independent
o Automated extraction, transformation and integration
of data
o Enable different levels of aggregation
• OU/BU, Country, Group
• Customer and group level (Key accounts)
o Reporting and alerting
o KPI follow-up and action management
o Historical information tracking
8. Ackinas WCM Solutions
Wider
Cash &
Credit
Cash &
Management
Forecast to
Credit
More specific
fulfill
Management
The Working Capital
Solution box
Order to Purchase to
Cash Pay
9. Optimising receivables: more than just
improving collections management
Order to Cash Cycle
Cash
Manage Verify Manage
Process Issue Collection &
Customer Credit- Account
Orders Invoices Dispute
Contracts worthiness Receivable
Management
Minimise
Process Increase Minimise bad Minimise Minimise
Reduce cycle time Overdues and
aim profitability debt levels unbilled AR balance
credit notes
• Credit rating and • Billing triggers
• Market & customer risk • Order limits • Ownership • Electronic receipts
evaluation procedures • Multiple formats
Key • Channels to market • Method of payment • Reporting • Auto -matching
• Credit limits • Reducing mail lag
drivers • Pricing • Credit enhancement • Credit policy • Audit trail
• Organisation • Invoice accuracy
• Payment terms • Order Fulfilment • Unapplied cash • Identify root causes
• Risk management • EDI
• Master file data • Volume rebates • Surface and record • Resolve queries
• Technology • e-Billing
• Sales forecast • Financing • Payment discounts • Eliminate causes
• Reporting • A/R posting
10. Accounts Payables is more than just
paying later
Purchase to Pay Cycle
Assess
Choose Suppliers & Order Process/book Pay
Supplier
Negotiate Contracts Materials Invoices Invoices
Performance
Minimise Increase supplier Maximise
Process Optimise timing Increase cycle time
sourcing cost performance Accounts Payables
aim
• Purchasing and • Invoicing timing
• Purchasing policy • Dispute management
approval controls • Responsibility
• Multiple sourcing • Quality Management • Settlement
• RFP/Tender process • Authority levels
Key drivers Assess vendor risk
•
• Auctions
• Contract Mgt
• Validation
discounts
• Risk ratings • Prioritise spend • Prioritise critical
• e-procurement • Dispute resolution
• Vendor reduction • Purchase order suppliers
• Use of preferred • Input to systems
• Pricing management • Method of payment
suppliers and group • Consolidated invoices
• Payment terms and control • Payment frequency
frameworks • ePayables and
• Settlement discount • Use of EDI
• Rebates automation
11. Reductions in inventory require fine-
tuning the entire end-to-end process
Forecast to Fulfil Cycle
Product Sales Receive Materials & Delivery and
Production Planning
Development Forecast Manage Inventory Customer Service
Process Accurate future sales Minimisation of Strategic customers Minimise stock held in
Minimise cost base
aim driven forecasts stock holding prioritised distribution network
• Picking & packing
• Product range &
• Stock planning • Part shipments
• Supply and cost SKUs
• Technology • Distribution network
of inputs • Scheduling
• Purchasing policy • Controls • Shipping regulations
Key • Supply of labour • Targets
• Make or buy • Stock audit & • Proof of delivery & billing triggers
• Demand drivers • Shift patterns
drivers • Market dynamics • Safety stock leakage • Product returns
• Line utilisation &
• Plant organisation • Returns • Maintenance plan options
• Lead times change over
• Inventory objectives • Excess stock • Response times
• Product quality
• Obsolescence • In-house or outsource
• Minimal variation
• Maintenance stock • Product quality
• Forecast requirements
• Billing accuracy
12. Multi Level Analysis Structure
Group
Key
Account
Country A Country B
Account Account
BU BU BU
Customer/ Customer/
Supplier Supplier
Site Site Site
13. Alerts
o On working capital levels/days
o On WC ratio levels
o On CCC days
o On AR levels and debtor days
o On AP levels and creditor days
o On inventory levels and days
15. Advantage of Financial Reporting on
Working Capital
o Provide insight in day-to-day and year-to-date cash positions
o Enable analysis of problem areas in the financial management.
o Facilitate risk management.
o Enable simulation of e.g. future cash positions.
o Enable action management.
o Enable alerts for e.g. lacking of segregation of duties.
o Enable benchmarking across operational units, countries and industry groups.
o Quantify money flow in the supply chain
o Install early warning for overtrading (over-stretch the financial resources of
the business).
o …
16. AWaCS Architecture
Collaboration
Server and DB
(SQL, Oracle)
Ackinas
Analysis, alerting & Simulations WCM Database
Ackinas WC
Transformation
Database
Data Extraction & Transformation
Local Local Local Local Local Local
Database Database Database Database Database Database
17. Working capital strategy
Prioritization of efforts to tackle quick-wins first
High Forsee issues
Reduce complexity (Pareto)
Risk and compliance
management
A Customer &
product
Improve processes
d to reduce possible issues
Rationalise
suppliers and
profitability
d customer policy
e Realise process tuning
on WCM
d Performance managment
and PDCA
v
a React faster Set process targets
administrative and
on issues
l operational
u Improve
WC data:
e better statistics and
multi entity
Low Time to realize added value > ½ Year
Weeks / Months ½ Year
