The Working Capital Monitor

Working Capital 3 Major Operational Processes

Balance Sheet €m

Fixed assets 1,355

Current assets

Stock

Debtors

Current liabilities

Creditors

___

Net current assets 537

Cash 263

Loans (2,314) ___

Reserves / net assets (194) ___

(raw materials, WIP and finished goods)

Stock

+

Debtors(money owed to us for our products)

-

Creditors(money we owe for our purchases)

=Working capital requirement

Other assets and liabilities

505

(283)

315

(35)

Customer discounts/bonus (47)

Days Sales Outstanding

Days Inventory Outstanding

Days Payables Outstanding

Some Working Capital myths….

... is a finance issue

... is a balance sheet item

... is improved only with systems implementation or strategic changes

.. has a negative impact on Customer Service (“collect early, push the products out and pay late”…)

.. generates little benefit

Perception: Working Capital Reality: Working Capital

… is an operational issue

… impacts Income statement

… is improved with new policies, processes and metrics

… improves Customer Service (“pay, deliver, collect to what has been negotiated”)

… can be improved 20-30% by process optimization

The Working Capital Mechanism

Cash

Purchasing

Payments

Production

Inventory

Sales

Invoicing

Invoice collection

Ord

er T

o Ca

sh

Purchase To Pay

Cash Conversion Cycle

DPO

DSO

DIO

Working capital can be represented as a timeline

TimeCreditors cycle

Order placed

Order received

Cashreceived

Cash Paid out

Goods held as stock or WIP

Forecast to FulfillProcess (FTF)

Order to Cash Process (OTC)

Debtors Cycle

Cash tied upAs WCAP

Purchase to Pay Process (P2P)

Provider of working capital

Time

Creditors cycle

Order placed

Order received

Cashreceived

Cash Paid out

Goods held as stock (DIO)

Forecast to FulfillProcess (FTF)

Order to Cash Process (OTC)

Debtors Cycle

Working Capital Provided

Purchase to Pay Process (P2P)

The Ackinas Working Capital Solutiono Daily monitoring solution for Working Capital and

related ratioso Single or multiple entity related and back-office

solution independento Automated extraction, transformation and integration

of datao Enable different levels of aggregation

• OU/BU, Country, Group• Customer and group level (Key accounts)

o Reporting and alertingo KPI follow-up and action managemento Historical information tracking

Cash &Credit

Management

Ackinas WCM Solutions

Mor

e sp

ecifi

cDeeper

Order toCash

Purchase toPay

Forecast tofulfill

Cash &Credit

ManagementThe Working Capital Solution box

Wider

Optimising receivables: more than just improving collections management

Order to Cash Cycle

CashCollection & Dispute Management

ManageAccount Receivable

IssueInvoices

VerifyCredit-worthiness

ProcessOrders

Manage Customer Contracts

• Market & customer risk • Channels to market • Pricing• Payment terms• Master file data• Sales forecast

• Order limits• Method of payment• Credit enhancement• Order Fulfilment• Volume rebates• Financing

• Billing triggers• Multiple formats• Reducing mail lag• Invoice accuracy• EDI• e-Billing• A/R posting

• Credit rating and evaluation procedures

• Credit limits• Organisation• Risk management• Technology• Reporting

• Ownership• Reporting• Credit policy• Unapplied cash• Surface and record• Payment discounts

• Electronic receipts• Auto -matching• Audit trail• Identify root causes• Resolve queries• Eliminate causes

Increaseprofitability Reduce cycle time Minimise

unbilledMinimise bad debt levels

Minimise AR balance

Minimise Overdues and credit notes

Process aim

Key drivers

Accounts Payables is more than just paying later

Purchase to Pay Cycle

PayInvoices

Process/book Invoices

AssessSupplier Performance

OrderMaterials

Choose Suppliers & Negotiate Contracts

• Purchasing policy• Multiple sourcing• Assess vendor risk• Risk ratings• Vendor reduction• Pricing• Payment terms• Settlement discount

• Purchasing and approval controls

• RFP/Tender process• Auctions• e-procurement• Use of preferred

suppliers and group frameworks

• Rebates

• Dispute management• Quality Management• Contract Mgt• Prioritise spend• Purchase order

managementand control

• Use of EDI

• Invoicing timing• Responsibility• Authority levels• Validation • Dispute resolution• Input to systems• Consolidated invoices• ePayables and

automation

• Settlementdiscounts

• Prioritise critical suppliers

• Method of payment• Payment frequency

Process aim

Key drivers

Minimise sourcing cost Optimise timing Increase supplier

performance Increase cycle time Maximise Accounts Payables

Reductions in inventory require fine-tuning the entire end-to-end process

Forecast to Fulfil Cycle

Delivery and Customer ServiceProduction PlanningReceive Materials &

Manage InventorySalesForecast

Product Development

• Purchasing policy• Make or buy• Market dynamics• Plant organisation• Inventory objectives

• Supply and cost of inputs• Supply of labour• Demand drivers• Safety stock• Lead times

• Product range &SKUs

• Scheduling• Targets• Shift patterns• Line utilisation &

change over• Product quality• Minimal variation• Forecast requirements

• Stock planning• Technology• Controls• Stock audit &

leakage• Returns• Excess stock• Obsolescence• Maintenance stock

• Picking & packing• Part shipments• Distribution network• Shipping regulations• Proof of delivery & billing triggers• Product returns• Maintenance plan options• Response times• In-house or outsource• Product quality• Billing accuracy

Minimise cost base Accurate future sales driven forecasts

Minimisation of stock holding

Strategic customers prioritised

Minimise stock held in distribution network

Process aim

Key drivers

Multi Level Analysis Structure

BU BU BU

Country A

Group

Country B

Key Account

Account

Customer/ Supplier

Account

Customer/ Supplier

Site Site Site

Alerts

o On working capital levels/dayso On WC ratio levelso On CCC dayso On AR levels and debtor dayso On AP levels and creditor dayso On inventory levels and days

Simulations

o Increase/decrease DSO/DIO/DPOo Increase/decrease Inventoryo Increase/decrease Receivables/payables and

debtor/creditor dayso Any combinations

Advantage of Financial Reporting on Working Capital

o Provide insight in day-to-day and year-to-date cash positionso Enable analysis of problem areas in the financial management.o Facilitate risk management.o Enable simulation of e.g. future cash positions.o Enable action management.o Enable alerts for e.g. lacking of segregation of duties.o Enable benchmarking across operational units, countries and industry groups.o Quantify money flow in the supply chaino Install early warning for overtrading (over-stretch the financial resources of the

business). o …

AWaCS Architecture

CollaborationServer and DB(SQL, Oracle)

Analysis, alerting & Simulations

Local Database

Data Extraction & Transformation

Ackinas WCTransformation

Database

Local Database

Local Database

Local Database

Local Database

Local Database

Ackinas WCM Database

Working capital strategy

Weeks / Months

> ½ Year

High

Low

Risk and compliancemanagementCustomer &

product profitability

Improve WC data:

better statistics andmulti entity

Prioritization of efforts to tackle quick-wins first

Added

value

Time to realize added value

Rationalisesuppliers and

customer policy

Realise process tuningon WCM

Performance managmentand PDCA

Set process targetsadministrative and

operational

React faster on issues

Improve processes to reduce possible issues

Reduce complexity (Pareto)Forsee issues

½ Year

Screenshots

Dashboard

DSO trend analysis

Simulations cash conversion cycle

Stock value vs target

DPO trends

Working capital simulations vs best performing

Contact

Steven Van der Taelensteven.vandertaelen@ackinas.comTel. +32 3 289 29 04Gsm. +32 486 57 10 45

Ackinas bvbaPrins Boudewijnlaan 302550 Kontich Belgium www.ackinas.com