ARTICLES:

Uncovering Cash and Insights from Working Capital

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Managing a company’s working capital isn’t the sexiest task. It’s often painstakingly technical. It’s hard to know how well a company is doing, even relative to peers; published financial data are too high level for precise benchmarking. And because working capital doesn’t appear on the income statement, it doesn’t directly affect earnings or operating profit — the measures that most commonly influence compensation. Although working capital management has long been a business-school staple, our research shows that performance is surprisingly variable, even among companies in the same industry.

Why Is This Relevant To The Midmarket: 

Companies that improve the performance of their working capital can generate cash and see benefits far beyond the finance department.

Managing a company’s working capital isn’t the sexiest task. It’s often painstakingly technical. It’s hard to know how well a company is doing, even relative to peers; published financial data are too high level for precise benchmarking. And because working capital doesn’t appear on the income statement, it doesn’t directly affect earnings or operating profit — the measures that most commonly influence compensation. Although working capital management has long been a business-school staple, our research shows that performance is surprisingly variable, even among companies in the same industry.