FOCUS 21
Making it sustainable
A cash culture cannot be turned on and off. And so, despite efforts to improve working capital, there is signifi cant risk that benefi ts will not stick. Initiatives to improve working capital performance are often short-term fi xes in response to economic doldrums or year-end accounting ‘window dressing’. When conditions improve or the reporting period closes, focus is often lost. So, instead of a year-end creditor stretch, retailers should look for more sustainable changes, such as addressing payment processes or aligning terms to stock risk.
To make sustainable improvements, I believe that retailers must see working capital as a long-term cultural change programme. In good times and bad, they need to stick to established procedures to maintain their short-term fi nancial health, and build fl exibility into their supply chains to improve response times in a shifting economy. They must also persuade suppliers to shoulder some of the inventory risk in return for latching onto their potentially rising fortunes..
Take nothing for granted. If the economy picks up, ask yourselves: • Do you have the appropriate working capital fl exibility to respond?
• Have you exhausted all available working capital options to lessen reliance on external fi nance?
• Are you leveraging supplier relationships for a mutual benefi t?
• Is your cash culture suffi ciently entrenched and capable of sustaining working capital initiatives?
Mark Raddan
UK Head of Cash Management at KPMG Tel: +44 20 76943580
mark.raddan@kpmg.co.uk
Mark has over 14 years experience working with Boards and their shareholders on working capital and operational transformation projects across a wide range of industry sectors, but particularly in retail. Mark currently KPMG’s cash and working capital team and is working with a wide range of clients across various sectors and geographies from FTSE 100 to niche PE backed businesses.
Ben Tatham Cash Management & Turnaround Services, Director Tel: +44 20 76943801
ben.tatham@kpmg.co.uk
Ben joined KPMG in 1999 and is a Director in KPMG’s Turnaround and Cash team where he specialises in driving operational effi ciency and working capital improvements. Ben is experienced at leading large and complex assignments advising Boards and management teams of international clients.
© 2014 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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WORKING CAPITAL
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