UNUSED CAPITAL held by UK companies is now worth up to £69bn, according to a Deloitte report.
The report, which looked at the performance of UK companies with a turnover of greater than £60m, discovered the figure is up 8% on the previous year's £64bn.
The unproductive capital was worth on average a cash injection of 5% of annual sales. According to the report, the excess working capital is typically tied up in inefficient financial and operational processes.
Andrew Harris, partner in Deloitte's finance transformation group, said that "The effective management of working capital can easily be overlooked", and that now "is a good time to focus on managing basic processes".
The report also highlights that 68% of cash is held by the top 11% of UK companies. It suggested that this, combined with inefficient cash conversion cycles, means that small businesses are hit hardest by unproductive working capital.
Many companies are working on increasing cash conversion efficiency, with 68% of CFO's involved listing it as a top priority in the next 12 months.
Harris condoned "a range of process efficiencies" and "financial instruments" that could be used in "streamlining excess working capital" which "will enable UK businesses to take advantage of the economic recovery."
Using excess working capital was highlighted as the most efficient way for a company meet shareholder expectations. Tapping into these funds would be the easiest way to input new strategies, according to the report.
You may also like
If budgeting is to have any value at all, it needs a radical overhaul. In today's dynamic marketplace, budgeting can no longer serve as a company's only management system; it must integrate with and support dedicated strategy management systems, process improvement systems, and the like. In this paper, Professor Peter Horvath and Dr Ralf Sauter present what's wrong with the current approach to budgeting and how to fix it.
In this white paper CCH provide checklists to help accountants and finance professionals both in practice and in business examine these issues and make plans. Also includes a case study of a large commercial organisation working through the first year of mandatory iXBRL filing.