Each phase should take approximately two weeks. Thus, the framework represents a six-week program for rapidly releasing cash tied up in working capital and maximizing current credit and financing opportunities.
Baseline position—cash visibility
Goal: Collect transactional data to benchmark against peers, and measure performance of the company’s payment terms in comparison with peer organizations.
- Review and assess interest rate impacts, including adjustment to cash vs. cost strategy.
- Benchmark terms by supplier spend and customer category to measure performance.
- Review customer and supplier risk profiles/creditworthiness.
- Perform segmentation across payables, receivables, and inventory.
- Conduct rapid inventory review (e.g., excess inventories by stock-keeping unit—SKU—and slow-moving and obsolete inventories).
Map and gap—define the targets
Goal: Identify priority payments and critical suppliers, customers, and drivers. In other words, map the leverage within your financial supply chains.
- Evaluate your debt, assess your capital structure, and model different financing/interest rate scenarios.
- Map the prospective impacts of available financing solutions (e.g., debt factoring) and supply-chain finance options.
- Evaluate credit terms, and negotiate the best terms that are also reasonable enough to not severely impact your trading partners.
- Map business-critical suppliers that should receive priority in accounts payable (A/P) workflows.
- Quantify the impacts of inventory factors on cash flows, including inflated buffer stocks, demand plan errors, and slow-moving inventories.
- Model the immediate tradeoffs and possible negotiation tactics that could accelerate payments across your accounts receivable (A/R) portfolio.
Execute the plan—pull the levers
Goal: Launch a cross-functional team to execute near-term and midterm cash conversion cycle goals.
- Launch teams to halt terms leakage, and to accelerate resolution of high-value unbilled receivables and invoice disputes to drive immediate payment.
- Accelerate funding and liquidity products to achieve strategic goals.
- Develop a daily forecast and visibility by understanding variance analysis across business line/product by geography.
- Establish a team rhythm for continuously monitoring A/R, A/P, and inventory metrics.