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In German. An interview with REL's Paul Moody on the working capital performance of private equity companies.
A staggering £42bn is tied up in "inefficient working capital" at the world's top 40 food and drink companies, according to consultants REL Consultancy, a division of The Hackett Group.
As Washington dissolves into a writhing mess of fingers all pointing at someone else, the government has shut down. And things might only get worse over the federal debt ceiling negotiations, when the country literally could run out of cash to operate. What the public sector lacks, the private has in abundance. Many large corporations are allegedly awash in a sea of cash, and a recent tally claims that the Fortune 50 collectively has $800 billion in offshore profits that are not subject to federal income tax.
Some large U.S. companies had unusually high days payable outstanding (DPO) in their last reported financial quarter.
How HVAC giant Lennox International transformed its credit and collections function.
Video Interview, in German. The Hackett Group's Daniel Windaus discusses the ability of working capital improvements to drive long-term value for private equity investors.
Working capital has risen up the agenda of Europe's largest companies, but represents little more than a token effort, finds Richard Crump.
There's never been a better time for finance professionals to focus on better ways of managing their working capital, given the wide range of options available. So just how can an organisation make its working capital work that bit harder? Insights from REL's Daniel Windaus and other experts.
Part two of an annual analysis of 2012 inventory performance by sector, based on data from The REL Consultancy.
Part one of an annual analysis of 2012 inventory performance by sector, based on data from The REL Consultancy.
Many big global companies keep three-quarters of their money outside of the U.S., one expert says. Some are stepping up search for M&A targets. (subscription required)
A guest contribution by REL's Daniel Windaus: "There is an emerging wisdom today that considers improving cash flow to be a key driver of shareholder value optimisation. It may not be as fashionable, or even as sexy, as a relentless focus on earnings per share but overlooking, or at least failing to prioritise, cash flow optimisation is short-changing shareholders. Shrewd financial directors today recognise that it's now imperative to understand future cash flows and requirements better than ever before because borrowing from the bank or sourcing investment is not as easy as it used to be."
As debt gets more expensive, here's how to access cash locked up in inventory, receivables, and payables.
A guest contribution from REL's Michael Wydra: "Asking for money can sometimes be tricky because businesses do not want to appear importunate. Therefore, it's important to find the right approach to coping with that situation in a sensitive way through clearly defined processes, responsibilities and training. If you get this right, then you can improve the payment cycle without waiting for Brussels to act."
We have highlighted many times the challenges of working capital management. It's become a cliché to refer to the "perfect storm" - the combination of virtually zero interest rates and constrained liquidity that gives both cash rich, large businesses and cash strapped suppliers a headache. But every cloud has a silver lining. Better working capital management provides an opportunity and now, REL, the specialist working capital arm of The Hackett Group, has revealed the size of the prize, in Europe - a total of €762bn is tied up in excess working capital - equivalent to 6 per cent of EU GDP!
Working capital management has risen up the agenda of large companies during the last year but they are still struggling to convert sales into cash, according to research by working capital consultancy REL. This insight includes a case study by Atlas Copco presented at the EuroFinance Singapore conference in May.
Working capital rose up the agenda of Europe's largest listed companies in 2012 but they are still struggling to convert sales into cash, and are sitting on €762 billion in excess working capital, according to consultancy REL, a division of The Hackett Group.
European companies are missing out on opportunities to generate cash. A total of EUR 762 billion is tied up in excess working capital at 800 of Europe's largest listed companies, according to consulting firm REL, a division of The Hackett Group.
Europe's largest companies left 762 billion euros ($1 trillion) of working capital unused in 2012, the equivalent of 6 percent of the European Union's GDP, according to a report published on Wednesday by the REL Consultancy, a division of The Hackett Group.
Corporate America is blowing cash, big time. Their opportunities to reap more profit from working capital expanded last year by a record $1 trillion, but many of the largest US public companies stumbled badly, according to a new study by REL Consultancy.
The ability of companies to generate cash from operations deteriorated in 2012, as the opportunity for working capital improvement at 1000 of the largest U.S. public companies rose dramatically, topping $1 trillion for the first time, according to the 15th annual working capital survey from REL Consultancy, a division of The Hackett Group, Inc. (NASDAQ: HCKT), and CFO Magazine.
Working capital performance among large U.S. public companies has improved only marginally over the last two years, according to REL Consulting's annual survey.
From a corporate perspective, the dark clouds of the recession did have one silver lining: Companies improved their working capital performance. With revenue opportunities stalled, if not declining, organizations enhanced their working capital due diligence, growing margins by taking an ax to days sales outstanding, payables outstanding, and inventory. No sooner did the dark clouds disperse, however, than some companies went back to their old ways of mismanaging working capital, effectively letting go of the rigor. In their eagerness to land new customers, some companies extended payment terms and let inventory levels rise so that they would have enough product in the pipeline and on the shelves to satisfy percolating demand.
While the recession inspired big gains in the working capital metrics of U.S. companies in 2009 and 2010, since then progress has stalled, according to consultancy REL.
More and more companies are signing on for supply chain finance. The financial crisis is credited with encouraging companies to find ways to balance their need to take longer to pay their bills with their suppliers' need for cash, but the interest continues to grow even as the economy slowly picks up steam. REL's Dan Ginsberg offers insights.
The overall working capital performance of the largest South African public mining companies improved in 2011/12 and remained near the best levels achieved in the past decade, according to research released earlier this month by global strategic business advisory and operations improvement consultancy The Hackett Group.
Companies have less cash available for debt reduction, acquisitions, innovation programs and dividend payments this year, says Dan Ginsberg, associate principal at REL Consultancy.
Company capital expenditures reached their highest level in at least five years at the end of 2012, as more public firms used their cash and borrowing to fund growth, according to data from REL Consultancy.
The REL Consultancy's Jonas Shoefer discusses working capital and the South African mining industry.
"REL's Jonas Schoefer talks on business radio about how REL can help mining companies with improving profitability through inventory optimisation."
The Hackett Group is a stalwart name in the international business world and has now come to South Africa "to free up working capital", says Jonas Schöfer. He believes that many large South African companies can free up between 10 and 30 percent of their working capital, just by improving the quality of their processes.
For Sky, the UK's leading home entertainment company and a client of The Hackett Group, creating the best finance team in Britain is a story of the accumulation of marginal gains.
According to REL's Craig Bailey, the grounding of Boeing's Dreamliner is proving costly to the airplane manufacturer. Working capital management plays a key role in getting through such setbacks.
Byliner by Adil Lahlou, in French, regarding working capital management in private equity held investments.
A byliner by REL's Daniel Windaus. 'Cash is king' is an oft-quoted mantra but reality is far removed from the theory as far as fast-growing companies and their working capital go. Private equity held investments arguably have the most to gain from optimising the cash conversion cycle, yet they are no better - indeed they are often worse - than the average enterprise. REL research into some of the world's biggest companies - PE backed or otherwise - shows working capital has oscillated in terms of its key ratios over the last five years in a way that is not strongly correlated with macro-economic drivers.
Happy New Year and welcome to Q1. Time to undo all the good work you did last quarter - and a little bit more. Let's hope the shareholders aren't paying attention. REL consultancy published some research last year that showed that on average businesses that play the year end game, on average improve their working capital by 10% in the last quarter of the year only to see it deteriorate by 11% in the following quarter.
Efficient working capital management can improve cash generation, funding capacity and financial structure. When working capital management is weak or deteriorates, all of these may suffer. For some types of companies, such as those in the construction or distribution sectors, working capital is at the heart of the business. Where management of working capital has been weak or has slipped, improving it can offer great opportunity for enhancing cash generation.
REL Director for South Africa Jonas Schoefer unpacks details on how the working capital performance improved slightly for 160 of the largest South African public companies in the REL analysis, in an interview with South African Business and Financial Journalist Candy Guvi.
How many companies play some games in the fourth quarter to make their working capital numbers look a bit better than they really are, including manipulation of some key supply chain related metrics? A new report from REL says quite a few, as it analyzed data from 979 non-financial public companies, finding that in total the group reduced their net working capital (NWC) from Q3 2011 to Q4 2011 by $24 billion, only to let it increase in Q1 2012 by $42 billion.
A recent study by consulting firm REL, "The Earnings Game: Is gaming the system to meet working capital targets really worth it at year-end?" examines the pressure many companies face to meet analysts' earnings expectations each quarter, as well as the gamesmanship in which some firms engage in order to make their numbers.
Many large U.S. companies continue to try and "game the system" at year-end, artificially improving their balance sheets by manipulating receivables, payables, and inventory, according to a new study from REL, a division of The Hackett Group, Inc. (NASDAQ: HCKT). Their efforts, which can range from deep discounting and extended payment terms on sales to simply "losing" supplier bills, do have a positive impact in Q4, the study found. But these companies pay a harsh price in Q1, when working capital performance bounces back to even worse levels than before.
Nearly half of the largest publicly traded companies continue to report violent working capital swings from the fourth quarter to the first quarter each year, a practice that can mask true performance and set companies up for a cycle of year-end squeezes that damage supplier relationships and efficiency in the long run, according to a recent study by REL, a division of The Hackett Group. (Subscription Required)
Four years ago, when the financial crisis was at its destructive peak, companies began using pay incentives to hit working capital targets. Heineken USA, for example, initiated a scheme they called 'Hunt for Cash'. As part of the scheme, departments across the company - finance, treasury, commercial, supply chain, and production groups - each had cash generation incentives built into their pay. The scheme, which was strategically launched in 2007, a year before the crisis hit, gained impetus when the company took on a large amount of debt with its purchase of Scottish and Newcastle in 2008, just as credit markets had begun drying up.
Video Interview with REL's Dan Ginsberg detailing results from REL's 2012 U.S. Working Capital Analysis.
German-language video interview with REL's Daniel Windaus featuring highlights from the 2012 working capital analysis of DACH companies.
Assuming that the recession will ever comes to an end, the ability to deploy working capital efficiently and effectively will serve as a harbinger of whether UK plc has the agility necessary to capitalise on the upturn when it eventually arrives. A study by REL Consulting of the 1,000 largest listed European groups by sales suggests that the omens are not good. The balance sheets of Europe's top businesses are bloated by billions of euros of excess capital, while billions more are being wasted as a result of inefficient cash management.
The ability of the largest U.S. companies to collect from customers and manage inventory improved just slightly in 2011, while payables performance worsened, according to the 14th annual working capital survey from REL Consulting, a division of The Hackett Group, Inc. and CFO Magazine.
The ability of the largest U.S. companies to collect from customers and manage inventory improved just slightly in 2011, while payables performance worsened, according to the 14th annual working capital survey from REL Consulting, a division of The Hackett Group, Inc. (NASDAQ: HCKT), and CFO Magazine.
Europe's companies, which have been sitting on a cash pile equivalent to some 9.4% of the region's gross domestic product, are beginning to spend, according to research from the working capital consultancy REL.
Six companies top the REL U.S. 1,000 list in terms of sustained working capital performance: Colgate-Palmolive, Cubic, Cytec Industries, Deluxe, PH Glatfelter, and Watts Water Technologies. These companies either improved working capital performance (days working capital and its three major elements) or sustained it (performance did not deteriorate by more than 5%) each year for three successive years.
It's one of the most important metrics for gauging a company's efficiency and financial health. So when a new survey of 1,000 of the largest public companies in the United States indicates that their working capital continues to be much larger than is considered prudent, that's cause for concern. The annual survey, conducted by REL Consulting, reveals an overall lack of sustained working capital improvement among U.S. companies. After a predictable decrease in working capital during the Great Recession, when companies focused more on the balance sheet, working capital performance has leveled off. ( Scorecard )
European companies could improve their working capital by almost €900 billion in aggregate through better management of their receivables, payables, and inventory, a consultancy specializing in working capital management has calculated. REL Consulting, part of The Hackett Group, has analyzed the accounts of 925 companies across Europe and found that working capital performance increased slightly in 2011 (or, in fact, remained almost flat, if you exclude the volatile oil and gas sector), but that there is still €886 billion that could be squeezed out of working capital and added to corporate cash piles. That's equal to 12% of total company sales.
Spanish and Italian companies are the worst at paying their bills. But that doesn't seem to matter much: they're also the worst at collecting on their invoices. So what goes around (or doesn't) comes around (or doesn't). Those truths are supported by the findings of a working capital survey comparing 925 companies for the fiscal years 2010 and 2011 recently released by REL, a consulting firm.
Companies are learning to rely on solid forecasts, rather than on formal budgets. This article includes insights from REL's Veronica Heald, and data from REL's recent forecasting study.
Europe's largest companies wasted almost €800bn last year as a result of inefficient cash management, research suggests. A study of the 1,000 biggest listed European groups by sales done by REL Consulting, a division of The Hackett Group, suggests that they relaxed their efforts to improve their internal cash position.
That massive pile of cash Corporate America has been sitting on for years is shrinking, and the reason bodes well for the nation's economy. An analysis by REL Consulting, a division of The Hackett Group, shows that companies are now re-investing in anticipation of growth, with annual capital expenditures up nearly 25 percent in 2011, to pre-recession levels.
Most large companies say they cannot correctly forecast operational basics like inventory, receivables, payables, and the underlying cash requirements to support them, according to REL Consulting.
Many finance directors at large companies seem unable to correctly forecast their inventory, receivables, payables and underlying cash requirements, a study by REL Consulting finds. The study estimates that Global 1000 companies lose about $2 billion per year due to poor working capital management.
Despite a global business environment where companies can be harshly punished by Wall Street for even small missteps in predicting revenue or earnings, most large companies say they cannot correctly forecast operational basics like inventory, receivables, payables, and the underlying cash requirements to support them, according to the results of a new study from REL Consulting, a division of The Hackett Group, Inc. (NASDAQ: HCKT).
As companies release first-quarter results over the next several weeks, analysts and economists will be keeping a close eye on inventories, seeking fresh insight into business confidence. Companies normally cut inventories at year-end to spruce up their balance sheets, leading to a drop in DIO. But an analysis done for CFO Journal by REL Consulting, part of Hackett Group Inc, shows that the fourth-quarter number remained flat with the third quarter. That suggests that companies held goods in their warehouses when they would typically be selling them off. (Subscription Required)
A bylined article by REL's Daniel Windauls. THE SOURCE of future growth for many European companies will occur across a set of culturally and geographically diverse countries, which include Brazil, Russia, India, China, Mexico and South Korea (BRICMK). As HMRC figures show, British organisations have increasing exposure to these countries, with growth occurring mostly in manufacturing sectors, which tend to be more working capital intensive. It is therefore becoming increasingly important to study their impact on net working capital (NWC) performance and how companies are managing processes to adjust to this change.
The U.S. Postal Service's December decision to decrease the expected standard delivery time of first-class mail to two-to-three days could have a negative impact on companies' working capital. Indeed, the move could cost a U.S. company with $10 billion in revenues up to $100 million in working capital, according to Veronica Heald, a practice leader at REL Consulting, a division of The Hackett Group that focuses on working capital.
A new working capital performance study has been launched by REL Consulting, a division of The Hackett Group, Inc. (NASDAQ: HCKT). The study, which examines "Working Capital Performance: Successes, Challenges and 2012 Objectives," is complimentary, and companies are invited to participate.
Brian Shanahan, Associate Principal at REL, explains the strain placed on the supply chain by poor working capital management.
The U.S. Postal Service decision to end next-day delivery could add tie up millions of dollars in working capital, according to new research from REL Consulting, a division of The Hackett Group.
There's plenty of money in the financial supply chain, but companies are still reluctant to spend it.
As the economy recovers, too many companies are losing their focus on capital management. The latest figures on corporate cash holdings from REL Consulting indicate both good and bad news when it comes to companies' management of their working capital. On the positive side, corporate cash balances have grown. In fact, cash holdings at the U.S.' 1,000 largest public companies increased 11 percent between June 2010 and June 2011, to an eye-popping $850 billion. That compares to $767 billion a year earlier.
You may have heard that the U.S. Postal Service had decided to scale back operations and eliminate next-day first-class mail delivery. Then there are continued closings of smaller post offices. According to REL Consulting, a division of The Hackett Group, the elimination of next-day first-class delivery alone will slow customer collections enough to cost a typical large U.S. company up to $100 million a year. The impact on a small company won't be anywhere near as large, but it could still hurt. And if there's post office near a client, sending invoices or receiving payments could become even more difficult. If you rely on traditional mail for your business, here are some steps you can take to help avoid an impact to your cash flow.
The U.S. Postal Service's recent decision to eliminate next-day delivery of first-class mail could cost typical large U.S. companies up to $100 million each year by making it significantly harder to collect from customers quickly, according to new research from REL Consulting, a division of The Hackett Group, Inc. (NASDAQ: HCKT).
How can your working capital needs impact your annual planning and forecasting process -- and how can improving working capital performance can help support your strategic plans in 2012 and beyond. Working capital programs always pique management's interest during times of falling demand and restricted credit markets, but a proactive and focused approach will be required to actively balance the revenue-cash-cost equation and help keep you at the head of the pack as global competition intensifies. Joe Calboreanu from REL Consulting Group explains why working capital should be a key component of all corporate planning programs, and more importantly, why a consistent focus on working capital will be a key differentiator in maintaining your competitive edge. (Access fee required)
The biggest U.S. publicly traded corporations have been stuffing their already bulging balance sheets with increasing amounts of cash, according to new research from REL Consulting, a division of The Hackett Group. By the end of the second quarter of 2011, in fact, 1,000 such companies were holding $850 billion in cash, or 11% more than they had on hand at the end of the second quarter of 2010.
Large public companies in the U.S. are continuing to hoard cash at record levels, and 1000 of the largest are now holding $850 billion, according to new research from REL Consulting, a division of The Hackett Group, Inc. (NASDAQ: HCKT).
The average size of cash balances held by giant U.S. companies in this year's second quarter rose 11% over last year Q2 - creating a hoard totaling $850 billion among the 1,000 largest public companies - new research from REL Consulting says. REL, a division of The Hackett Group, based its tally on filings of those top firms during the first half. Overall, the numbers show that as revenue increased, so too did cash on hand kept by companies. The total was $767 billion for the top-thousand companies in the 2010 Q2. However, debt also rose by 7% quarter-to-quarter, which the authors see as an indication that low-cost borrowing is being employed to boost the amount of cash retained by companies.
As the recession eases, European businesses are bouncing back with the biggest working capital improvement for five years. But are these gains sustainable, asks REL's Brian Shanahan.
Another month, another lack of jobs being added to the economy. But what's really astounding is on the financial end, according to the study by CFO Magazine and REL (a division of The Hackett Group). The thousand largest companies in the U.S. sat on a total of $853 billion in cash reserves at the end of 2010, which was a 6 percent jump over 2009, 30 percent more than in 2008, and a whopping 75 percent since 2007.
Europe's companies are improving working capital performance, but there's still much to do, according to new working capital research from REL Consulting.
The largest U.S. companies are hoarding tremendous amounts of cash at present, in many cases borrowing to do it, while smaller companies remain starved for capital, according to newly-released working capital research from REL Consulting, a division of The Hackett Group, Inc. (NASDAQ: HCKT), and CFO Magazine.
An analysis of DIO performance by various industrial sectors by Editor Dan Gilmore, using REL's 2011 Working Capital research as its source material.
Days sales outstanding is not a good metric for measuring collections performance, according to The Credit Research Foundation. REL's Veronica Heald provides insights on how CFOs can get a clearer picture of collections performance by also looking at "best possible DSO".
Editor-in-Chief Dan Gilmore, "For the last several years, I have been doing reporting and analysis based on the annual Working Capital Scorecard that had been published by CFO magazine based on data compiled by REL, a division of the The Hackett Group. My work on this has focused on the inventory part of the working capital equation.
Guest blog from Archstone Consulting's John Yoo.
For months after the Great Recession officially ended in June 2009, the need for cash trumped all else. Today, cash is no longer a problem, as corporate coffers are filled to the brim. But don't be too quick to credit working capital improvement. The 2% decrease in days working capital (DWC) last year qualifies as downright modest, some say, although it is certainly an improvement, given that DWC increased 9.9% the prior year, the worst performance in half a decade. Many CFOs disavow any connection between companies' strong cash positions and an apparent lack of emphasis on working capital. How strong? One thousand of the biggest publicly reporting nonfinancial companies registered an 11.5% jump in revenue last year, according to the 2011 CFO/REL Working Capital Scorecard. (By comparison, revenue dropped by 12.1% in 2009.)
The 1,000 largest U.S. corporations outside the finance sector have used low borrowing costs to build up an $853 billion cushion of cash, but they are hoarding the money rather than spending it, according to a new study by REL Consulting, a division of The Hackett Group, and CFO Magazine.
As companies recover from the global recession, many are considering the opportunities in growth markets such as Brazil, Russia, India, China, Mexico, and Korea. As part of this, companies should understand the potential impact of growth in these markets on receivables, payables, inventory, and other net working capital elements, and how they can manage processes to adjust to this change. A bylined article by REL's Daniel Windaus.
Coverage in French. The need for working capital decreased by 2.7 days of sales in 2010, according to a new study by REL Consulting.
REL's Stephen Loffler explains how Financial Directors can effectively create a cash culture within their organisations. Watch Video
Starting with payables, receivables and inventories, this Q&A will set out a handful of simple points around which an FD can start to build a strategic approach to one of the most common, least-openly discussed of capital challenges. Watch Video
This report, based on REL findings, looks in depth at the source-to-settle (S2S) cycle and in particular the management of the payment process. If this process is managed poorly it can tie up significant amounts of money.
From REL Principal Gavin Swindell: Here's a contrarian view on the apparently hot topic of cash forecasting amongst the CFO's agenda. The Hackett Group recently published a survey of CFOs, and 70 percent rated cash flow forecasting as their top priority to be worked upon in 2011. Now, maybe I am being a little simplistic, but I find this strange.
Political risk in the Middle East, the tsunami in Japan, poorer than expected growth figures in the UK and elsewhere: modelling business risk in 2011 seems to become harder with each passing week. This white paper details results from an Accountancy Age survey into credit and supply chain risk which demonstrates that, while payment and supply patterns seem to be generally more secure than the during the dog days of 2008, businesses still need to be on alert when it comes to credit and supply chain risk. REL's Brian Shanahan offers his insights.
In this detailed analyst insight, REL's Michael Rellihan explains how demand-based replenishment can help food and beverage companies significantly stabilize plant operations by establishing fixed production cycles using customer demand instead of a forecast-based ("push") scheduling method.
In this detailed analyst insight, REL's Michael Rellihan explains how product line structure and feature-value analysis can deliver cost savings for consumer products companies, as part of a broader, comprehensive framework supported by quantitative and qualitative tools.
Having a cash culture in the finance function is useless unless front-line staff understand its importance - and how they affect it. Here are eight ways to get the message across.
German chemicals company Altana found itself in a strong position to ride out the recent global economic crisis, as the result of an overhaul to their working capital program promoted by by a shift in company direction in 2007. The company worked closely with the REL division of The Hackett Group to analyze working capital improvement opportunities, and determine how to best take advantage of them.
Over two years after the start o f the Great Credit Crisis, banks are still not lending money. But big businesses know exactly where to go for a quick, interest-free loan ... the little guy. Even as corporate profits recover, big companies continue to squeeze their small vendors, stretching out payment terms and writing late checks.
Through an intensive working capital improvement program, executed with the help of The REL Consultancy, Bayer has improved net cash flow by €5.4bn and reduced net finance debt by nearly a third. This profile provides an in-depth look at their activities.
Part two of a Webcast with REL (See June 24 below for part one). This part features REL's Brian Shanahan discussing how financial directors can start to build a strategic approach to working capital management.
REL's Daniel Windaus offers The latest findings from the annual REL survey of European working capital, which shows companies suffering an expansion of their cash requirement while capital remains hard to come by. Mr. Windaus explains how finance functions can minimize their working capital requirements by working more closely with a variety of business units - and developing sound processes and systems to help them manage for cash.
With revenue gains still something of a pipe dream for most businesses, owners are looking for ways to squeeze as much cash flow as possible out of their existing operations. It's a simple enough formula: collect your receivables as fast as possible and slow down your payables without jeopardizing your relationship with suppliers. Still, some companies are much better at it than others: Top-performing companies collected from customers 17 days more quickly than typical companies in 2009 and stretched payables by an additional 10 days, according to REL, a consultancy focused on improving cash flow and working capital and a division of the Hackett Group. REL's Analis a DeHaro provides the lion's share of the analysis and input for the five tips included in this article.
REL Americas President Mark Tennant and Business Finance Editor in Chief Jack Sweeney discuss research showing how companies struggle to achieve accuracy in cash forecasting, and best practices companies use to identify forecasting obstacles, improve organizational alignment, and enhance measurement and management accuracy.
Indepth German-language coverage of the 2010 REL 1000 analysis of the working capital performance of the largest public companies in Europe. The three articles in this two-page spread focus in part of the performance of DAX companies. The lead story also includes quotes and information from several German companies, including SAP, Bayer, Salzgitter and Klöckner. Separate article in the spread focus on the performance of small- and medium-sized companies in the DAX, and on the performance of German companies in comparison to those in other countries of Europe. (Note: The underlying research materials are also available directly from REL, with free registration, here www.relconsultancy.com/workingcapital)
According to a recent study by REL, only 34% of industries posted an improvement in days working capital (DWC) last year, and most companies took a big hit in working capital performance as collections slowed and inventory grew. REL President Mark Tennant outlines some best practices designed to improve DWC, while discussing the study's findings with Business Finance editor in chief Jack Sweeney.
Cytec Industries CFO David Drillock speaks with Business Finance Editor in Chief Jack Sweeney about how Cytec achieved $200 million in working capital improvements as part of an aggressive working capital management strategy, accomplished with the support of REL. Recorded last month at The Hackett Group's 20th Annual Best Practices Conference.
Corporate America got fiscally fit during the recession. But as the recovery picks up steam, signs are emerging that exercise might have been a passing fad, according to a survey by REL, the working-capital consulting unit of Hackett Group. In the depths of the recession, companies collected debts quickly and strung out payments to creditors, tactics that allowed them to build cash and dodge borrowing. Now, that thrift appears to be reversing. This trend should concern investors because it means companies aren't using their capital as effectively as they could be. In turn, that means companies could be doing better on a host of efficiency metrics--such as return on capital--to which investors should pay attention.
Pay incentives for hitting working capital targets proved effective during the recession, although companies are already starting to scale them back, according to REL President Mark Tennant, and the experiences of companies such as Cytec, Allergan, and Heineken.
This cover story package spotlights findings from the 2010 REL/CFO US Working Capital research. While most observers view 2009 as the very heart of the Great Recession, it was also - in terms of working capital - the beginning of the Great Hangover. As 2008 drew to a close and the full extent of the financial crisis became clear, many companies scrambled for cash by pushing down hard on every available working capital lever at their disposal. For them, it was payback time: inventories had to be replenished and overdue bills were finally paid in full. For other companies, those further down the supply chain or with longer cycle times, the full recession didn't hit until late in the year, when unsold inventory swelled, customers lobbied suppliers for longer payment terms or discounts, and those suppliers asked their suppliers for leniency. Either way the result was the same: 2009 was one of the worst years ever for corporate working capital performance. The article also features the working capital improvement initiative of REL client Cytec and their CFO Dave Drillock, along with efforts by Intel, Allergan, Thomson Reuters, and Hughes Communication.
This article, in the French-language business L'Agefi, details results from the 2010 REL Europe Working capital research, focusing in part on the performance of French companies.
It seems that after a decade of spending, businesses have actually got into the habit of austerity and of saving - but perhaps a little too zealously. The latest study of working capital practices by REL reveals that there is excess capital of €742bn held on the balance sheets of Europe's largest companies by revenue.
Over a period of twelve months, Hackett client Molson Coors outsourced its IT, HR and finance functions - from selection to completion - a feat that transformed and consolidated the brewery's worldwideoperations. At The Hackett Group's 20th Annual Best Practices Conference, Molson Coors CFO Stewart Glendinning spoke to Business Finance Editor in Chief Jack Sweeney about the success and challenges of his company's outsourcing journey.
While world-class procurement organizations continue to outperform their peers in driving supplier diversity spending, a new study by The Hackett Group Inc. identifies several critical ways that most companies fail in their supplier diversity programs. According to Hackett's research, most rely on overly simplistic measures to evaluate the progress of supplier diversity programs, and never truly assess whether programs are meeting corporate objectives. Most companies also fail to consider whether a few large suppliers or many smaller suppliers best supports their corporate goals.
Tax incentives are needed from the new government to keep interest rates down and reduce corporate borrowing and working capital, according to REL Senior Director Brian Shanahan.
This article on how UK companies can improve collections policies cites REL's research showing that the UK is a "relatively benign payment environment" with typical Days Sales Outstanding (DSO) of 43 days. This compares favorably to the European average of 58 days, the French average of 71 days and Italy's DSO, which is 83 days. Note: Once you click on the link below, the article begins on page 35.
Are late-paying customers really delinquents, or just unhappy? Before canceling accounts or calling a collection agency, make sure past-due payments aren't as much your fault as theirs. Some companies purposely pay slowly to conserve cash. But, according to Mark Tennant, a working capital expert with the consulting firm REL, many late payers are simply reacting to mistakes made by vendors that charged the wrong amount, sent an invoice to the wrong address, left key information off an invoice, or, perhaps worst of all, delivered damaged or out-of-spec goods or services. Pricing errors are the most common culprit behind late payments, according to Analisa DeHaro, leader of REL's North American customer-to-cash practice.
The Hackett Group's research suggests that application portfolio management is the key to a number of good things you want from IT, including improved effectiveness, cost reduction, and better partnering with the business. The trick lies in reducing the number of applications in the portfolio. Top-performing IT organizations, according to Hackett, operate with nearly half the applications per thousand end-users of typical companies.
It appears that the economy is slowly and painfully inching toward a turnaround. Unemployment is holding steady at 9.7 percent, reports the Bureau of Labor Statistics, and The Bureau of Economic Analysis says that GDP grew at an annualized rate of 5.9 in the fourth quarter of 2009.
It all sounds great. And it is. However, a recovering economy can present its own challenges. Most significantly, if companies don't continue to focus on working capital and cash flow management, they can end up back in trouble. That's one conclusion of some research recently completed by REL, a consulting firm focused on working capital management. REL examined the ins and outs of the cash flow of the 1,000 largest public companies in the U.S. The researchers found that working capital performance, as measured by days of working capital (DWC), improved by about five percent between the second and third quarters of 2009, to 31.7 days. While a move in the right direction, the number remains worse than it was in 2007 and 2008, when it dipped below 30 days.
Despite the overall lack of top-line growth during the economic downturn, many companies have stayed afloat by downsizing staff and eking out supply-chain efficiencies. In the face of continuing unemployment and the attendant lag in consumer demand, however, how long can companies maintain respectable margins merely by growing leaner?
Maybe longer than you might think. Opportunities still abound for doing more with less, according to a new study of the 1,000 largest U.S. companies (in terms of sales) by REL, a division of The Hackett Group. Indeed, the study concludes that those companies could wring a total of as much as $709 billion in excess cash flow from their supply chains by adjusting their inventory levels, getting their customers to pay their bills on time, and managing their accounts payable carefully, according to research on working capital for the third quarter of 2009.
Analyst Insight, from Archstone Principals Dave Sievers and Bob Allen: The recent economic turmoil has pulled into sharp focus the issue of h ow to manage increasingly volatile supply chains. Through late 2008 and 2009, many companies simply panicked and aggressively cut both production and productive assets. These companies are beginning to pay for those aggressive cuts as demand is now starting to increase -- straining diminished capabilities. For 2010, we offer guidance on how companies can get supply chains back in balance and get sales and operations planning right.
The global financial crisis has made cash a major priority for most companies. But according to a new study from REL, a division of The Hackett Group, Inc. (NASDAQ: HCKT), many still fail to take the key steps required to build a corporate culture that successfully focuses on cash.
So cash is king, once again. Not that it ever was dethroned; it's just that, for a while, it shared its perch with other corporate goals, like growth. Not anymore. Credit is tight and sales are down, so companies have to wring all they can from the funds they have on hand. This prompts the question, Just how do you do that? A recent report by REL/Hackett Group, "Cash Culture Study," offers some strategies that companies can use to foster a "cash culture."
Companies are managing their cash more effectively than they were before the onset of the financial crisis, a survey released on Wednesday suggests. The survey of 53 companies with an average of $24 billion in revenue found that 94 percent consider cash flow optimization to be important or very important. REL's research details the key steps companies can take to build a cash culture, and how prevalent they are in companies today.
Cash on hand between 2007 and 2008 fell at least 10% in all but two sectors. Total cash on hand, including short-term borrowings, fell 16% to 14.7% for PCs and peripherals to 2.6% to 1.9% for multi-utilities, according to a new study by REL, the working capital division of The Hackett.
Coverage, in German, of REL's DACH region working capital analysis. Infineon executives are also quoted, and working capital performance by about a dozen DACH companies, including Volkswagon, Man, Beiersdorf, BASF, and Alcon, is highlighted.
Large corporations are tightening the screws on their smaller counterparts as the credit crunch intensifies companies' efforts to hold on to their cash. In an example of corporate Darwinism at work, the recent round of quarterly earnings results showed companies with annual revenue of more than $5 billion sped up their collection of cash from customers while slowing their own payments to suppliers.
Firms with less than $500 million in annual sales, on the other hand, generally took longer to collect cash and paid their bills faster than in the same period a year ago, according to an analysis conducted for The Wall Street Journal by REL, the working-capital division of global strategic advisory firm The Hackett Group.
Working capital is front of mind for most business. Lending won't return to pre-recessionary levels anytime soon. But there are simple techniques to leverage working capital, according to REL, a division of The Hackett Group.
This leading daily news outlet generated coverage, in German, of REL's 2009 European Working Capital research, focusing on the performance of German companies.
This article, in German, focuses on REL's working capital research.
The brutal recession has made it increasingly difficult for corporate executives to forecast cash flow, a problem that could contribute to a surge in bankruptcies in the face of weak credit markets. About 80 percent of the 1,000 largest global companies are unable to forecast cash flow over the next quarter within a 5 percent range of their actual performance, according to a study by The Hackett Group Inc and it's REL Working Capital unit.
It's the lifeblood of the business, the fuel for the corporate machine: money. And it's O2C's job to secure it and pipe it in, as smoothly and efficiently as possible. Choke up here and you're depriving your organization of critical energy at the worst possible time; get all channels running fluently, however, and without obstruction, and you'll be driving the business forwards on injections of high-octane cash. REL Senior Director Brian Shanahan contributed insights on managing credit risk, payment terms, and other issues to this article.
According to a report by REL and CFO Europe Magazine, the total improvement in working capital among the 1000 largest public companies in Europe in 2008 equated to $53.8 billion. But strong performance by oil and gas companies masked degradation in performance by others, and the gap between leaders and laggards widened significantly. REL's Daniel Windaus discusses key results from the study.
Plato called necessity the mother of invention. It may also be the mother of collection. Squeezed by a slowing economy and nearly frozen credit markets, U.S. companies showed themselves surprisingly adept last year at freeing cash from the one remaining source at hand: their balance sheets. Ramping upcollect ion efforts and paring down inventories, the 1,000 largest companies slashed days working capital (DWC) in 2008 by 6.4% - the best improvement on that front in at least five years, reports consulting firm REL, the Hackett Group division that compiled this 12th annual edition of the CFO/REL Working Capital Scorecard. The result: a total of $62.7 billion liberated from working capital.
As the U.S. recession deepened late last year, it took 9 percent longer for businesses to collect money they were owed as customers held onto their cash, according to new research from REL, the working capital division of The Hackett Group. That presented corporate Am erica with a conundrum: Each company's desire to protect its own balance sheet by holding out on paying bills caused ripples of pain through the economy as other companies made the same decision. The 1,000 largest U.S. companies took an average of 39.7 days to collect on sales in the fourth quarter, up from 36.4 days a year earlier, according to the REL data.
"Cash Clinic" is a new video series dedicated to helping senior finance executives explore leading-edge cash management strategies. These programmes will focus on the key concerns of finance chiefs when it comes to e nsuring th at cash remains king at their companies. From working capital management to banking relationships to budgeting and forecasting, the series will address all aspects of cash management best practice via panel debates and case studies.
Few metrics signal looming danger more sharply than a declining current ratio, yet many industries began the year with current assets outpacing current liabilities by a narrow margin. Seven sectors saw current ratios stumble in 2008, according to REL Consultancy, which compiled the data. Worst hit were independent power producers and energy traders, which suffered a notable 36 percent decline in their aggregate current ratio, to 1.4.
Working capital optimization has always been the least expensive and most readily available form of cash. With tightening credit markets the option of liberating cash from a company's operational processes has moved to the forefront. Inventory optimization presents the second-largest opportunity among the working capital components after trade receivables and ahead of trade payables.This analyst insight from Henri van der Eerden offers REL's guidance on how companies can benefit from optimising inventory performance.
Large companies are accelerating their use of offshore outsourcing, and as many as a quarter of IT jobs at Global 1,000 firms may be moved offshore by 2010, according to The Hackett Group, a Miami-based consulting firm whose clients include many multinational corporations. According to the firm's research, those large companies -- which have revenues of at least $5 billion -- will move about 350,000 corporate jobs offshore over the next two years. More than half of those jobs will be in IT, with the remainder in finance, human resources and procurement.
This article spotlights findings from the new REL/CFO Europe Cash Masters scorecard, which shows a clear opportunity for European companies to improve their bottom line through an increased focus on improving cash conversion efficiency (CCE) - the amount of cash flow that companies derive from operations as a percentage of sales.
Regal Beloit Corp. CFO David Barta has taken approximately 30 days out of his company's cash cycle over the past four years. But he and the rest of the leadership team at the $1.8 billion maker of motion-control products want more. "Our commitment to the board this year is to take another 3 days out of the cycle," Barta says. "That is not a huge stretch, but it is something for which my feet are held to the fire."
From Citigroup to British building product maker Wolseley and beyond, the recent global economic turmoil has driven firms to cut hundreds of thousands of jobs. Companies globally have been hammered by the fallout from the subprime-mortgage debacle and its repercussions in financial markets. Many are desperately seeking a cure. And the most attractive medicine on offer looks like cash.
The average global corporation is sitting on enough cash to buffer half the impact of a yearlong recession, if management could only figure out a way to get their hands on it That's the conclusion of a study released this week by strategic consultants at the Hackett Group.
Signs abound that this recession could be severe. Motorola Inc; . (MOT) recently announced it was laying off 3,000; Goldman Sachs Group Inc.(GS); 3,260; Xerox Corp. (XRX); 3,000; and Chrysler LLC; 5,000. By contrast Hackett estimates the 1,000 global companies in its study could minimize job cuts and s ave $3.2 billion, or nearly 13% of annual revenue, if companies were more strategic.
The latest Cash Masters Survey from CFO Asia and REL offers hints on how to prepare for a slowing economy. As Warren Buffett likes to say, you don't know who's been swimming naked until the tide goes out. Although this latest CFO Asia/REL Consulting Cash Masters Survey covers 2007, a happier time for the APAC 850 (the 850 largest Asia Pacific companies in terms of sales), it may offer a few hints about how to get your business suit ready for what promises to be one of the corporate world's highest, driest periods in decades.
Beware your survival instincts: they may dampen corporate performance more than you might expect. With a recession looming or quite possibly upon us, it can be tempting to ease up on receivables and retain inventory in order to placate cash-strapped customers. But those seemingly small sacrifices actually impose a steep cost, diverting precious cash to working capital. CFOs who want to bolster the case for strict working-capital policies may find plenty of support in the 11th annual CFO/REL Working Capital Scorecard.
Asia's top 850 companies failed to make full use of US $833 billion in working capital because of inefficient cash flow practices. Last year, CFO Asia's 2007 Working Capital Survey estimated that the region's 725 biggest companies, excluding automakers, had US $535 billion in working capital unnecessarily tied up in receivables, payables, and inventories in 2006. It's the same story in this year's survey, which covered 850 of the Asia-Pacific region's top enterprises. According to REL, the U.S. consultancy that conducts the study, US $833 billion in total working capital was not put to productive use in 2007.
It's taking more time for companies to collect on their sales, longer than any time since the 2001 recession. Cash Flow consultant REL, (a division of The Hackett Group) and CFO Magazine found it took the country's 1,000 largest publicly traded businesses, excluding automakers, an average of 41 days for them to collect their money from customers in 2007. That's a 3.4 percent jump from 2006.
Corporate America is having the hardest time getting its customers to pay their bills since the last U.S. recession in 2001, according to a study released on Wednesday. The 1,000 largest U.S. public companies in 2007 took 41 days on average to collect payments from their customers, up from 39.7 days a year earlier and 39.2 days in 2001, the study by consultancy REL and CFO Magazine found.
U.K. companies are now doing a worse job at managing working capital performance, as they also see their ratio of free cash flow to sales falling sharply, according to research by REL, a division of The Hackett Group.
This article on how companies can reduce late payments in the current cash-strapped economy, includes insights from REL Global Practice Leader Hye Yu.
With credit at a premium, freeing up funds from working capital gains a new urgency. This cover story features findings from the 2008 REL/CFO Europe TWC Research. It also profiles two companies that have made dramatic improvements in TWC - German commercial vehicle group MAN and Italian white goods manufacturer CFO.
Companies have improved working capital management, but not by much. This article provides detailed results from the 2008 REL/CFO Europe TWC Research, and links to the complete survey results, which provide detailed metrics for the 1000 largest public companies in Europe.
Europe's biggest companies are paying their suppliers more slowly, bringing the average pay period to over 45 days, a new report shows. Brian Shanahan from REL discusses the findings.
Last year, when we first took a look at the corporate propensity to prop up fourth-quarter results at the potential expense of the following quarter's performance (see "Fourth and Goal," November 2007), recession loomed on the horizon. Today everyone from Warren Buffett to a bevy of economists to, in fact, CFOs say that the recession isn't just looming, it's here - and it's not leaving anytime soon.
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REL director for South Africa Jonas Schoefer unpacks details on how the working capital performance improved slightly for 160 of the largest South African public companies in the REL analysis, in an interview with South African Business and Financial Journalist Candy Guvi.