Working capital tells us a lot about how well a company is managed. It is an indicator of good management, can provide a real competitive advantage, and is the life blood of every company.
The PwC 2015 Annual Global Working Capital Survey reveals that for the first time since 2010 working capital has shown a significant improvement, which has contributed to a jump of 11.3% in the cash-on-hand of companies.
The PwC 2015 Annual Global Working Capital Survey reveals that for the first time since 2010 working capital has shown a significant improvement, which has contributed to a jump of 11.3% in the cash-on-hand of companies.
The largest improvement came from the asset side of the balance sheet, particularly from enhancements in receivables management. However, with the revenue trends suggesting that EUR 237 billion additional working capital is needed to finance next year's growth alone, there is still a significant gap to bridge.
PwC analysed the working capital performance of 10,215 listed companies worldwide from 2010 to 2014, and investigated how it varies by industry and geography. In Asia, the Net Working Capital/Sales for all industries increased from 11.6% in 2010 to 13.5%. In Europe, it decreased from 12.2% to 10.8% and in the USA and Canada, it decreased from 9.6% to 9.3%.
PwC survey shows that a company’s working capital performance is driven by four main factors: Firstly, the industry sector it operates in. Some sectors require more working capital than others.
However, our analysis shows there is a wide gap between the bottom and top performers in every industry, demonstrating that some companies are more adept at playing the cards they are dealt. Secondly, the economic maturity of the region.
Companies operating in developed economies have been able to fine-tune their operational processes over many years and adjust their business models if needed. In the emerging, fast growth economies cash and working capital are typically managed less well, as cash flows are growing each year. Only when growth curves flatten or even decline, cash and working capital management become a top priority in the boardroom.
Thirdly, company size is important. Larger companies tend to be better at managing their working capital. Smaller, at times even fledgling businesses, often have less sophisticated working processes, systems and functional expertise, whilst arguably they have a greater need for effective cash management to finance their growth.
Lastly and most significantly, the importance that management places on cash and working capital.
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However, our analysis shows there is a wide gap between the bottom and top performers in every industry, demonstrating that some companies are more adept at playing the cards they are dealt. Secondly, the economic maturity of the region.
Companies operating in developed economies have been able to fine-tune their operational processes over many years and adjust their business models if needed. In the emerging, fast growth economies cash and working capital are typically managed less well, as cash flows are growing each year. Only when growth curves flatten or even decline, cash and working capital management become a top priority in the boardroom.
Thirdly, company size is important. Larger companies tend to be better at managing their working capital. Smaller, at times even fledgling businesses, often have less sophisticated working processes, systems and functional expertise, whilst arguably they have a greater need for effective cash management to finance their growth.
Lastly and most significantly, the importance that management places on cash and working capital.
Create your own professional report with Google Apps for Business: http://goo.gl/s2JpHs
Work Better Together from Anywhere, Try it Free !!!
More than 5 million businesses have made the move to Google Apps to help employees work better together and be more productive, wherever and whenever they work. Google’s solution is cloud-based, which means software updates are as easy as refreshing your web browser. With Google Apps, there are no servers to purchase and maintain, reducing IT cost and complexity.Google Apps includes secure, reliable workplace tools for email, calendar, text and video chat, document creation, project websites, and online storage and sync, and allows for easy extensibility with hundreds of applications in the Google Apps Marketplace.
Create your own professional report with Google Apps for Business: http://goo.gl/s2JpHs
Switching to Google Apps is easy for IT and for end-users. With data migration capabilities for all common legacy systems included at no extra cost, companies can transition quickly and with minimal disruption. Google Apps offers users the familiar experiences of Gmail, Google Calendar, Google Drive, Docs, Sheets, Slides and other tools already used by hundreds of millions of people in their personal lives, so minimal training and support are required.
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