Well-managed businesses measure and track performance on the metrics that matter most. A carefully selected set of working capital performance metrics translates the business strategy into tangible objectives. By measuring your working capital performance, you can gauge improvement and find out whether your efforts are moving the business closer to its working capital objectives.
Working Capital Metrics and their progress over time are an essential part of any REL working capital engagement. Since they are important when understanding the real client issues, REL spends a significant portion of time on quantitative analyses of relevant metrics, mirroring those with qualitative interview findings and validating them with the client. After gaining an understanding of the operating and business model, customers, suppliers, industry and the market, REL determines which information best suits the information needs and defines how to extract those from the clients systems. A further drill down in those areas which reveal opportunity can support getting to the root causes and preparing the ground for potential working capital improvements.
As the client gets familiar with the KPI definition and reporting, the methodology of the Working Capital Metrics typically will be handed over to the client team - for instance as a Working Capital Dashboard - and becomes part of the routine reporting process. This allows for continued monitoring of Working Capital at executive pyramid-level and understanding of the operational processes impacting the Working Capital performance and thus supports sustainable cash improvement beyond the initial REL project work.
REL uses a range of working capital metrics to establish a baseline of current performance, benchmarking your organization against your peer group, sector average or an internal measure. For more information please do not hesitate to contact us.