Organisations can improve their working capital by focusing on four key areas, according to new research by Nordea.
Working capital management (WCM) is important to every business — it can help organisations improve cash flow, enjoy a better return on invested capital and reduce funding costs. But achieving effective WCM can be challenging. To find out how the Nordics are faring, Nordea analysed the key financial metrics of 403 companies over the period 2008–2013.
The findings of the research are detailed in a new report, which also looks at the measures implemented by 15 corporates that significantly improved their days working capital (DWC). DWC is an indication of how long a company takes to convert its working capital to revenue.
Overall, the study found that working capital performance in the Nordics is improving — there was a relative improvement of 6.8 % or five days in DWC between 2008 and 2013.
The study also suggests that regardless of the industry or initial DWC figures, there are measures that can be put in place to improve WCM, including a focus on four key areas. These areas include making WCM a priority — ensuring there is strong executive ownership and clear, organisation-wide communication on working capital targets — and optimising inventory management in order to turn inventory into sales revenue more quickly. The other two areas, streamlining supply chain management and prioritising receivables management, are equally effective in boosting working capital performance.
To find out more about these focus areas and making working capital management more efficient, download the full Nordea Working Capital Management report from Nordea Insights.