Strategic Cash Conversion Cycle Efficiency

The Strategic Issues are developed by the facilitator alongside the 'C' level executive or team.

Our robust approach is to eventually map the As Is to the To Be process for all aspects of the financial supply chain. This includes order to cash (O2C), procurement to payment (P2P), Reverse Supply Chain (R2C) and Inventory to Cash (I2C) which itself includes stock and work in progress

Our first task is to develop a project phase and work step diagram. An example is shown below:

Strategic Working Capital Optimisation

Typically we work with a project team to define the steps around the framework we have agreed with the Management Board.

The assessment of policies, management, systems and data can be undertaken to answer questions like:

Why has debtor days increased substantially in the last 6 months?

How are we seen by our suppliers with regard to their payment profile?

Are we able to consistently service our current and future levels of debt?

Do we have a robust risk review for our key customers and suppliers?

Do our monthly, quarterly and annual reporting metrics truly reflect our effectiveness in managing the cash conversion cycle?

Examples of specific outcomes:

Each organisation will have an outcome specific to its circumstances and strategic intent which determine the focus for action to achieve the 'To Be' process. For example:

Misalignment of the Financial Supply Chain

Once the cash conversion cycle is understood we can assess the objectives required to meet the covenants and loan due dates or to bridge liquidity gaps, unblock bottlenecks, understand severance of contracts with customers, suppliers or even with providers of finance. Timing is critical as investors, credit agencies, stakeholders and employees will require unique approaches to address the revised cash strategy.

Payment to Creditors - Supply Chain Finance, Dynamic Discounting could be investigated

This will require methodical public relations planning and robust narrative to satisfy all parties, stakeholders and external agencies ie credit rating companies.

Reduction of Debtors- outsourcing collection and understanding Factoring/ Securitisation

Careful measuring, monitoring and managing of debtors accounts is required to undertake a transfer of debt to other parties and we will map and advise the team on how this may be achieved.

Reverse Supply Chain- where recycled, refurbished, reclaimed materials occurs

Critical to most CSR –Corporate Social Responsible- initiatives is the ability to demonstrate that 'green initiatives' have been undertaken and that they are at least cash neutral. Our expertise has highlighted where organisations can generate real cash returns.


The relationship between ownership and location of stock, as well as the reasoning as to why it is held, are critical factors to consider when optimising stock. Also, if work in progress is a critical component of inventory then our unique milestone mapping approach could be utilised to deliver a full appreciation of liquidity gaps on contracts.


Operational Cash Conversion Cycle Efficiency

The principle we adopt is to understand the major issues at the end of the cash cycle (i.e. Receivables) and uncover the possible root causes upstream in the processes. We walk the processes 'against the flow' that delivers outputs to customers. In other words continuing to walk further upstream will uncover more upstream problems in the same parts of processes previously identified or in completely different areas and functions. The severity of the root cause will also be assessed (i.e. High, Medium or Low). For example a problem with trying to collect cash after invoicing may be due to poorly defined terms in the contract.

At various points upstream the reasons for a downstream problem should start to become more apparent and thus solutions to the problems will start to form.

Strategic Working Capital Optimisation

Where the scope of the project is large then the team divides the working capital model of the business into a number of sections. Team members (generally in pairs) can then start their walks from a number of different places.

The facilitator's role is to coordinate the interactions across the groups of team members so as to bring to everyone's attention the root causes & issues one team is finding that are to be found in other parts of the business.









The questions we endeavor to answer could include:

Does the function, department or location have the capacity, capability and maturity to resolve the issue?

Are there adequate safeguards and controls within the processes to ensure cash can be collected robustly?

Can the team identify the savings (in days) that the 'to be' process will generate?

Are the relevant working capital drivers identified?

For example:

The strategic review identified that key suppliers were demanding earlier payment terms as they felt that they were not being given adequate lead time to replenish stocks to the contractual terms agreed six months before.

The Problem:

The purchase orders being placed on suppliers were being raised in line with an old delivery schedule that did not reflect the new run rates.


Introduction of Just in Time (JIT) to replenish key inventory lines at their point of use, with revised contractual terms for key suppliers that are aligned to new service level agreements (SLA's)




Bespoke Employee Course(s)

Delivered at clients' locations or at our facilities in English Heritage maintained Wrest Park, Silsoe, MK45 4HR, these bespoke courses are full day from 9am until 4pm and include lunch. Later finish times can be accommodated with evening dinner if required.

Please complete the contact us form for a comprehensive schedule of contents and agenda

Inhouse management course.

The management courses are delivered to senior executive teams in a 'clinic' manner where the client requires awareness training that leads to identification of liquidity gaps, appreciation of alternative financing arrangements and an understanding of diversionary costs that is causing the cash conversion cycle to become inefficient. For further details please complete the contact us form.

CIMA CPD Mastercourse
19th November 2013
10th July (Thursday) 2014
10th December (Wednesday) 2014

Accounting CPD- Nelson Croom

General awareness working capital course offered via the web at a time that suits the course attendee.

Working Capital Optimisation and Cash Flow Management is part of Nelson Croom's peer-enriched learning suite of learning.

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