Releasing excess levels of cash tied up in working capital represents the cheapest form of finance available to a business.

Cash freed up can be used to reduce debt, increase the return to owners, or invest to fund your growth ambitions. A business needs first to identify the right opportunities, then design and implement new processes, in order to sustainably release cash from working capital.

Effective working capital management requires a strategy that focuses on maintaining an efficient working capital ratio: that is, managing the levels of both current assets (i.e. accounts receivable, inventory) and current liabilities (i.e. accounts payable) to effectively manage your business.

However, it is just one element of business performance. Maintaining control of working capital as companies increasingly look to grow, invest in new products, diversify, and consider merger and acquisition activity, while balancing profitability, operational efficiency, quality and customer experience, can be extremely challenging.

We believe that the balance sheet only shows the symptoms

Businesses must take a more holistic look at their processes across all functions, and engage all areas of the business including finance, operations, supply chain, procurement and sales in order to implement and manage an effective working capital strategy. All parts of the business must buy in. This is how businesses can really win and achieve tangible, cash benefits.

Our methodology considers net working capital as a timeline impacted by dozens of processes across all functions of the business. There is no one-size-fits-all – we scale this methodology to reflect your organisation and its processes, as well as considering the environment and industry in which you operate.

Our proven methodology

There is no one solution for effective working capital management. Grant Thornton applies our proven methodology that goes beyond a standard high-level approach focused on short-term benefits. Instead, we break down each of the three key cycles: Order to Cash (i.e. accounts receivable), Procure to Pay (i.e. accounts payable) and Forecast to Fulfil (i.e. inventory) into eight separate processes, and up to 99 individual levers in order to identify where there is opportunity for improvement in your processes to optimise working capital. Sometimes only a few levers are relevant to a given business, but the impact can be significant.

We then work with you to design and implement new processes where opportunities are identified, and assist you to embed the culture and discipline required to ensure they are effective through our implementation and monitoring support program.

Accessing global expertise

Our Grant Thornton network operates across more than 140 countries. By engaging your Grant Thornton contact, you have access to a consistent and coordinated team applying our proven working capital optimisation methodology globally, wherever you do business.

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Partner & National Head of Restructuring Advisory
Matt Byrnes
Matt Byrnes
Partner & National Head of Restructuring Advisory
Matt Byrnes

What is working capital?

Working capital:

Working capital is the net capital – or money – it takes to run your business on a day-to-day basis. If you take your current assets and minus your current liabilities, the result is considered your working capital. It is a ratio to watch in the business. While working capital generally means your organisation is financially healthy, low working capital can mean you will struggle to grow, and too much means you are not adequately reinvesting your cash.

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