1. Home
  2. Working Capital Management
  3. Total Working Capital

Don’t you need a Working Capital Council too?

John Donegan, Treasurer, Hewlett-Packard Financial Services, gave an important presentation at the Eurofinance Conference in Rome in October on 'Co-relating working capital with funding and investment decisions' in which he described Hewlett Packard's approach to working capital management which is one of the top concerns of their CFO. No wonder senior management is interested. A one-day improvement: in DSO saves $350m, in DOI saves $262m, and in DPO saves $263m.

He explained that, theoretically it looks very attractive to improve the cash conversion cycle (CCC) whenever and wherever you can, the problem is that global complexity can slow progress to improvements, and it is easy to work in silos on improving WCM without considering the wider picture. He stressed the need to do cost/benefit analysis across all business units and include the qualitative aspects in the analysis. Lower CCC does not automatically mean "better" working capital management; the benefits don't always exceed the costs.

There are so many overlapping roles in a large company's working capital management that improvements in working capital in one area can be counter-productive overall, see Figure.

Overlapping Roles in Working Capital Management

Source & Copyright©2011 - Hewlett Packard

Sound familiar? Doesn't your company need a Working Capital Council too?

Like this item? Get our Weekly Update newsletter. Subscribe today

This item appears in the following sections:
Working Capital Management
Total Working Capital


No comment yet, why not be the first?

Add a comment

New comment submissions are moderated.