PwC says managing working capital is vital
Companies can ensure they are financially healthy by managing their working capital more effectively, says PricewaterhouseCoopers.
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The firms’ business recovery service has told companies to focus on three key areas of working capital which, it says, can improve their economic outlook.
Companies are advised to ensure a more robust analysis of their inventory, to reveal ‘sludge’ stock, which should be sold off where possible or scrapped.
They should also improve their handling of receivables, ensuring they do not neglect invoicing and debt collection.
Thirdly a company should not fall into the trap of delaying payment of bills as this results in interest payable on late payment and the potential loss of settlement discounts.
The firm advises companies to follow best practice ‘good housekeeping’ across the business, to break down the supply chain into key components and considering each carefully, to set targets for keeping inventory and to consider the benefits of outsourcing.
Bob Ward, partner at PwC’s business regeneration arm commented: ‘Improving working capital management is essential for all companies. It is not just about focusing on working capital when times are tough. Rigorous and effective working capital management makes good business sense whatever the financial health of your company.’