Top tips for better working capital management

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H M Williams Chartered Accountants
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Cash is the number one priority for businesses and yet many CFOs are afraid of leading the charge when it comes to working capital management initiatives. Hugh Williams explains why it’s time for CFOs to get their hands dirty.

A lot of firms are currently undertaking some initiative to better manage their working capital because they cannot fund their businesses in the same way as they did in the past. Credit is either too difficult to get or much more expensive than before. Most have taken short term measures to stem the flow of cash (paying suppliers more slowly, getting money in faster from customers, and indeed cutting jobs) but these measures are running out of steam and are bad for long-term business relationships and for the wider economy.

Successfully managing working...

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Working Capital --CFO's need to get their hands dirty

Whilst agreeing wholeheartedly with Hugh's posting I would like to add that the Integrated Business Planning (IBP) piece needs, in our view, to have the management team thinking 'alongside experts' who have the experience and knowledge of how such plans need not only to be long term but continuously updated with what we have called working capital DRIVERS. These are the real metrics behind the KPI's that then deliver the DSO.DPO and DIO so loved by banks and the finance fraternity but actually meam very little in practice.

Credit, loans, refinancing will only be given by those who can see the real liquidity so that they know the debt, loan can be serviced (look at Mouchel and now HMV) and with trillions of dollars of debt due before 2015 (the majority of  the UK debt matures in 2012/13 accoording to Moody's) now is the time to tackle working capital optimisation ,before its too late!

john mardle www.develin.co.uk

0795 756 7053

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