Efficio helps organizations increase shareholder value not only by reducing costs through strategic sourcing initiatives but also by releasing cash via optimization of payables, receivables and inventory, to help clients managing working capital.
Maintaining a healthy working capital position is essential to sustain the balance between growth, profitability and liquidity. But it’s a difficult challenge for many businesses. One reason is that most organizations are focussed – and incentivized – exclusively on EBITDA. As a result, effort and resources are usually concentrated on increasing revenue or reducing costs, while maintaining service levels.
Shareholder value can be further enhanced by reducing working capital requirements, which subsequently enables the business to realize enhanced profitability with the same level of capital investment.
Working capital improvement provides organizations with access to finance at a lower cost than alternatives, such as bank finance, and without diluting equity or issuing shares. The balance sheet can feasibly be improved as much as 20%, and these gains are frequently achieved almost immediately and with relatively little effort.
As well as improving an organizations’ ability to fund their day-to-day operations, working capital optimization typically results in better working relationships throughout the business – and across the entire supply chain.
Managing Working Capital Service Summary
Efficio uses a three-phased approach to help clients identify, deliver and sustain working capital improvements opportunities:
- Outside-in view aims to identify areas of opportunities and the elements of working capital to prioritize. Typically one week in duration, the main outcome is a preliminary identification and quantification of opportunities.
- Opportunity assessment (OA) is a deep dive to identify and confirm priority areas of focus. This phase focusses on gaps in performance in three key areas – accounts payable, inventories and accounts receivable – and how to align them with best practices. Typically three to four weeks in duration, the main outcome is a business case documenting the size and nature of key working capital optimization opportunities and a detailed plan to achieve them.
- Implementation – an expert team is deployed to deliver the measurable benefits identified in the OA, using Efficio’s proven methodology. The six- to nine-month project outcome is tangible with sustainable benefits and a transfer of skills and knowledge to enable ongoing improvements.
Efficio’s approach is supported by inhouse digital capabilities that allow us to rapidly provide clients with customized digital tools to facilitate the identification of working capital improvement opportunities. Importantly, they also enable the performance of identified improvement initiatives to be easily tracked, monitored and reported.
The digital tools include a comprehensive dashboard for ‘at a glance’ metrics and updates on progress, ensuring savings and improvements are delivered and ongoing opportunities can be identified.
We have significant expertise in releasing cash from working capital either as part of dedicated program or alongside procurement transformation. Notable results achieved include:
- 20% reduction of receivables in a leading supplier of modular building solutions
- 16% of payables improvements enabled at a holiday park operator
- Inventory improvements at a global food distributor, balancing cash and service levels
- Several due diligences including key improvements area and detailed roadmap to secure cash opportunities