Even though we are facing a turbulent future and cash is the lifeblood of any company, yet another working capital management study - this time, the “2018/19 PwC annual working capital study” - shows all the old problems remain. This latest study showed:

• Converting cash is becoming harder: While revenues are up by 10% on last year, this year we’ve seen a decline in companies’ ability to turn higher revenue into cash
• Capital expenditure is continuing to decline: Capital expenditure (capex) as a percentage of revenues has plummeted during the last five years, suggesting that companies are managing cash flows by cutting investment.
• Cost of cash is increasing
• Creditor days continue to be high at 68 DPO
• € 1. 3 t r could be released from the balance sheets of global listed companies by addressing poor working capital performance
• DSO and DIO finally show first improvement in five years
• €300bn of additional cash has been consumed by working capital (Although net working capital (NWC) days has fallen slightly from their highest (worst) level in 2016., the absolute values of Net Operating Working Capital (NWC) increased by 10.3% in 2017)
• Capex spend relative to revenue at a compound annual rate of 3.6% (By this measure, companies’ relative capital expenditure is now at the lowest level PwC have seen.)
• working capital performance change 2013-17 expressed in days varied considerably between industries:
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    • Source & Copyright©2018 - PwC 
• difference between the best and the worst in each sector is still significant: 
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    • Source & Copyright©2018 - PwC
• Size of company has impact with small and medium-sized companies have much longer payables cycles than larger companies
• Globally: Companies in Europe and Africa have turned the tide, while performance has slipped in Latin America.

Release cash from working capital 

The report lists the key areas where comapnies could release cash from their working capital:

• Accounts receivable
  • Tailored, proactive collections
  • Credit risk policies
  • Aligned and optimised customer terms
  • Billing timeliness and quality
  • Contract & milestone management
  • Systematic dispute resolution
  • Dispute root cause elimination
• Inventory
  • Lean and agile supply chain strategies • Global coordination
  • Forecasting techniques
  • Production planning
  • Inventory tracking
  • Balancing cost, cash and service level considerations
  • Inventory parameters and controls defining target stock
  • Inventory replenishment methodologies
• Accounts payable
  • Consolidated spending
  • Increased control with centre-led procurement
  • Avoid leakage with purchasing channels
  • Payment terms
  • Supply chain finance benefits assessment and implementation
  • Payment methods
  • Eradicate early payments.

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CTMfile take: This latest survey shows shows that all the old problems remain, and the solutions remain the same too.