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Created on 12.11.2018

These key levers are available to you in working capital management

The optimization of cash flows forms the basis of a company’s success in business. And this is precisely where working capital management comes in. We explain which key levers are available to companies through working capital management.

Many companies face a daily battle to optimize their liquidity. Sufficient liquidity enables investments to be financed by the company itself, making it more independent. Working capital management allows cash flows in the value chain to be managed carefully by companies, creating win-win situations with suppliers and customers. Companies can increase their profitability and performance significantly over the long term by continually optimizing working capital and using the best credit standing in the supply chain.

But how exactly does working capital management work? Which analyses and key figures are relevant?

The key levers of working capital management

By definition, working capital management (WCM) means the active management of tied-up capital or working capital. Efficient working capital management does not just improve cash flow as an overarching goal. It also helps to improve processes and profitability and to optimize current assets. WCM provides a wide range of levers for managing corporate success.

The key levers of WCM are applied in four areas of controlling:

  • Accounts receivable: accounts receivable management vis-à-vis customers is optimized so that payment terms are reduced and met.
  • Accounts payable: current liabilities vis-à-vis suppliers are negotiated to achieve improved conditions (extending payment term or pre-financing). 
  • Inventories: stock including turnover is continually analysed and optimized.
  • Liquidity: the flexible optimization of accounts receivable and accounts payable results in the optimization of liquidity which can be used profitably (investment or prefinancing in the value chain).

PostFinance is currently using three instruments to ensure optimal working capital management and to improve a company’s performance:

  • Factoring to optimize customer cash flows and liquidity
  • Reverse factoring to optimize supplier cash flows and liquidity
  • Dynamic discounting for flexible price reductions in close consultation with suppliers based on partnership

In view of its expertise in the field of finance, PostFinance provides a targeted portfolio of WCM services.

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