Search
 

Make Your Working Capital Work

Working capital management involves balancing a host of tradeoffs. Top companies integrate these considerations into both day-to-day operations and long-term decision-making.

By Meg Waters | Updated on August 07, 2014
Little has changed in companies’ working capital management over the past year—which means that companies have a huge opportunity for improvement. This is the key take-away from this year’s “2014 U.S. Working Capital Survey” from REL, a division of The Hackett Group.

In this year’s iteration of the annual study, REL and CFO Magazine analyzed the 2013 financial statements of the 1,000 largest public companies that have U.S.-based headquarters and are not in the financial services sector (the “REL 1000”). They separated the companies into industry groupings, then organized them into quartiles within each industry in terms of days inventory on hand (DIO), days sales outstanding (DSO), and days payables outstanding (DPO). For every company outside the top quartile in one of these metrics, REL and CFO calculated how much additional cash the organization would have available if it improved efficiency enough in its inventory, accounts receivable, or accounts payable processes to bring the associated metric in line with the level achieved by the top quartile of businesses in its industry.

This analysis revealed that the total opportunity for improving working capital among the 1,000 companies in the study is $1.020 trillion—which separates into a total accounts receivable (A/R) opportunity of $331 billion, a total accounts payable (A/P) opportunity of $266 billion, and a total inventory opportunity of $423 billion.

Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.

Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM websites including PropertyCasualty360.com and Law.com.

Already have an account?

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Recommended Stories

Why Companies Are Racing to the U.S. Debt Market

Why Companies Are Racing to the U.S. Debt Market

Caleb Mutua & Jeannine Amodeo |

Borrowing costs have become compelling, as markets are already pricing in expectations for reduced interest rates. And several external factors could reverse that trend.

Treasury & Risk

Join Treasury & Risk

Don’t miss crucial treasury and finance news along with in-depth analysis and insights you need to make informed treasury decisions. Join Treasury & Risk now!

  • Free unlimited access to Treasury & Risk including case studies with corporate innovators, informative newsletters, educational webcasts, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM publications including PropertyCasualty360.com and Law.com.

Already have an account? Sign In Now
Join Treasury & Risk

Copyright © 2024 ALM Global, LLC. All Rights Reserved.