Working capital I: Effectively managing accounts receivables and payables
After years of consolidation and cost cutting, companies are switching back to growth strategies that require additional capital. Often it is not necessary to obtain such funds from capital markets as resources can likely be found tied up in the company's balance sheet as working capital.
Roland Berger Strategy Consultants' study shows where potential cash can be found by effectively managing receivables and payables. What's more, we highlight how companies can significantly reduce their risks. In the first part of the global study, we asked 400 large and medium-sized businesses how they manage their receivables and payables and what trends they expect in the future.
We found that through proper management, companies can improve the performance of their accounts receivable and payable by more than 30% over 5 years. Especially companies in the pharmaceutical/ healthcare, basic materials, transportation and the utilities industries showed potential for improvement. The study participants evaluated optimization levers that include current and future success factors. The study provides comprehensive accounts receivable and payable benchmarks by industry.
About 10% of the study participants have reached best-practice levels in accounts receivable and payable management. These companies use successful levers on a regular basis, such as by
- Classifying customer portfolios by behavior and risk
- Using factoring and asset-backed securities
- Defining clear rules for collection processes
- Applying "one face to the customer"
- Reporting accounts receivable and payable indicators to top management
- Linking employee incentives to accounts receivable levels
Improving the management of accounts receivable and payable offers huge potential for almost any company. Such potential can often be quickly realized. Use our expertise to tap hidden cash resources trapped in your balance sheet.
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