The 3 pillars of an effective working capital management are:
No nasty surprises and provide money to business needs and effectively utilize the surplus cash.
Remove the bottlenecks in working capital cycles, carefully look for leakages and blockages and eliminate.
Look for opportunities in the internal processes in working capital cycles like Receivables, Payables and Inventory and ensure faster rotation of cash to enhance ROCE.f
Plan & Budgets are of no use if they are not backed up by cash flow forecasts. Budgets can show excellent profits, but only a granular cash flow forecast, which is too broken down in monthly/weekly terms – will bring out the real stress in managing a business. We identify those stress points, understand the reasons for those stress points, and enable entrepreneurs to make informed decisions to manage the stress.
Businesses love buying inventory. You enter a shop floor, and you will not find many places to move around. Especially at month ends when every corner is crammed with the inventory. This is nothing but cash, lying in the factory premises. At times oblivious. Mostly, there is inventory because there is no monitoring. Alas! ageing inventory rapidly loses value! After all, seasonality is inbuilt in every business by default.
At CFO Bridge, we help you change your approach towards inventory. We start with measuring your list, daily basis. Continuous engagement leads to deriving optimum levels, and we set processes to maintain such optimum levels. We work with Production & Planning teams to align inventory levels to seasonality of business demand.
We do not jump into the conclusion that you need a new working capital facility or, for that matter, an extension of an existing facility. We would rather first understand why you are thinking along those lines – is that too manage current cash flows better or whether to fund growth through incremental working capital. Once we are satisfied and have agreed with you, we help you raise funds as needed. With our ecosystem of partners, experts, and experienced professionals, we have raised several crores for our clients.
Less said, the better. We sell, then we forget that we realize how hard is to collect the cash. Receivables pile on, and the poor accountant is tasked with the collection struggles. We exhaust our working capital limits with banks and then struggle for cash to fund business growth. This is a familiar and prevalent business problem.
At CFO Bridge, we debottleneck the entire Order to Cash cycle. We understand the ordering process, invoicing process & collection process, and identify bottlenecks at each of these touchpoints. We put in place measures at each of these processes; and personally monitor, drive, and implement changes. We bring in cultural change in organizations in their approach to managing receivables.