Optimization of working capital management

Three findings from PostFinance’s WCM consultation activities

Dr. Daniel Maucher and Erik Herlyn, WCM experts from PostFinance, help companies to analyse and implement WCM measures. These three findings were gained from years of working as consultants.

  • Experience from our consultation activities shows that there are ways of optimizing working capital in virtually every company, be it in terms of receivables and liabilities or with regard to inventories in commercial and manufacturing companies. Impressive results can be achieved by implementing the appropriate solutions. This can be seen for example in the following cases from PostFinance’s WCM consultation activities:

    Case 1: In a manufacturing company with a sales volume of 150& million francs a year, factoring enabled tied-up capital to be reduced by 25& million francs, and finance charges to be cut by 6 percent (WACC) to 1.2 percent (see illustration, figures for illustrative purposes only).

    Numerical example of factoring for a manufacturing company

    Case 2: In a major corporation, dynamic discounting led to an improvement of the financial result of over 2 million francs, and procurement costs were reduced by more than 2 million francs (see illustration, figures for illustrative purposes only).

    Numerical example of dynamic discounting for a major corporation

    Take advantage of the potential of WCM for your company. It’s well worth it.

  • In order to achieve the greatest possible effect with WCM measures, they must be individually tailored to your company. The accounting aspect is an important point to consider, for example. Particularly with banking solutions, you should check that the effects of the working capital measures can actually be achieved in practice. The auditors must be prepared to accept amounts as trade accounts payable and not to declare them as financial liabilities in the case of a factoring solution, for example. To ensure that this is possible, a great deal of experience is needed with regard to WCM consultation. An individual solution also guarantees optimal compatibility with your current tools and systems. Last but not least, by introducing an individual solution, you can avoid unnecessary additional expenditure. This requires a creative approach with a constant focus on user behaviour and expenditure. It can be worth implementing WCM measures for major invoice items only, for instance, while ignoring smaller invoice amounts.& 

  • In our capacity as WCM advisors, we find that companies use a wide range of different methods to evaluate working capital. While some assess working capital according to the external financing rate, others use the weighted average cost of capital (WACC) or even the Libor for evaluation purposes. And others still apply a constant percentage of 10 percent, for instance – regardless of interest rate levels. A common method for assessing the cost of working capital is to take the weighted average cost of capital and calculate how this corresponds to the periodicity of inventories, receivables and liabilities, and the periodicity of interest. Items tied up in the short term are evaluated using short-term interest rates, and those tied up in the long term with long-term interest rates. By applying this method, you will soon find that working capital is associated with relatively high costs – and that solutions such as factoring or reverse factoring represent a good way of reducing these costs. Solutions of this kind also allow you to generate effective win-win situations along your value chain.

Would you like to find out more about WCM?

PostFinance can provide a professional WCM team to help your company analyse and implement WCM measures. Your direct contacts are Dr& Daniel Maucher and Erik Herlyn. Both are proven WCM specialists with sound specialist knowledge and many years of practical experience in the field of WCM.

Dr Daniel Maucher

Project Manager Working Capital Management

Dr Daniel Maucher has been working as Project Manager Working Capital Management at PostFinance since 2013.

He also passes on his knowledge of WCM as a lecturer at two universities of applied sciences. In addition, he is an active member of the WCM working group at the International Association of Controllers.

Before joining PostFinance, Daniel Maucher worked as a research assistant at the Chair for Logistics Management at the University of St.& Gallen and as a project engineer for the BMW Group.

Daniel Maucher graduated in economics from the University of St.& Gallen and studied business engineering at the Karlsruhe Institute of Technology (KIT) and Munich University of Applied Sciences.

Erik Herlyn

Working capital management

Erik Herlyn has been analysing potential for optimizing working capital in large and medium-sized enterprises on behalf of PostFinance since 2012. Based on these analyses and studies, he has developed and integrated customer-specific solutions in the fields of finance and logistics which now represent part of the WCM range of services available from PostFinance and Swiss Post.

He also contributes his WCM know-how as guest lecturer at the University of St.& Gallen and at various universities of applied sciences, as well as via directorships.

As a qualified engineer in production technology (Dipl. Ing.), he previously held positions as CFO of private and US-listed oil exploration companies. On graduating he headed the KPMG Switzerland insurance company as consultant.

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