Cashrace - Working Capital Management

CASHRACE™ - Working Capital Management

Checking for double payments, overpayments and incorrect payments, including checking sales tax offsetting and import sales tax.

First steps

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In European executive floors, the topic of working capital management has increased in importance, especially in volatile times. In CASHRACE™ we implement measures agreed with you in the area of debtors/creditors, which reduce the capital commitment by up to 15%. This reduces interest costs and creates free liquidity.

Large companies in particular have recognized the importance of working capital management for financial leeway, but in our experience there are still numerous optimization opportunities in German medium-sized companies.

Working capital optimization pays off!

Working capital management is an important part of cash management and directly influences the capital commitment (financing costs) and the liquidity (disposition) of the company.

The focus is on reducing receivables (accounts receivable management), reducing inventories (inventory management) and increasing liabilities (accounts payable management). The capital tie-up period is calculated as a figure (as shown in the graphic above) from the tie-up periods for inventories (DIO), receivables (DSO) and liabilities (DPO).

Analysis of the levers and implementation

In practice, working capital management is the consistent improvement of cash flows in the following areas, which are also the most important working capital drivers:

for receivables: means of payment, high number of payment conditions (= missing key conditions), efficient processes, error-free invoices, texting of the invoices/reminders, responsibility and transparency,
for supplier liabilities: means of payment, high number of payment conditions (= missing key conditions), payment time and payment frequency (unscheduled payments), payment processes and optimization of discount use,
in the warehouse: planning quality, availability of raw materials and goods, service level agreement with suppliers and transparency in warehousing.

In an analysis in the course of a CASHRACE™ project, CASHFINDER® supports you in searching, finding and implementing savings potential in the area of working capital.

CASHRACE™ - Example FIG

"After the merger of Asea and Brown Boveri in 1988, the new management carried out a CASHRACE™. The aim was to improve the capital turnover from 0.9 to 1.25. The accounts receivable management in the numerous sales companies had to play their part: The target was to reduce accounts receivable from USD 3.8 billion to USD 3.1 billion at the end of 1987. This alone, it was calculated, could save USD 60 million in interest on borrowed capital which would improve the net profit before tax by 10%. Thanks to the exemplary conception and implementation of the campaign, the targets were not only achieved within two years, they were even exceeded."

(Source: Book Modern Cash Management)