The money’s there for the taking!

Optimizing Net Working Capital Management for a pharmaceutical company

CONTACT LN Chercher
Stern Stewart & CO. GmbH
Salvatorplatz 4
80333 Munich

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Starting situations – illiquid, despite high margins

The specialty chemicals company was able to obtain high margins from international chemical companies. However, this was not reflected in the business figures. The artificial separation of margin controlling, which was the responsibility of sales, and NWC management, which was looked after within the financial organization, prevented sustainable value creation. The Board of Management was under pressure to take action. However, the unfounded fear of losing customers made it impossible to approach the problem – a receivables portfolio which was far too high – at its root.

Project approach – everyone pulling together

To lift the artificial separation between sales and the financial organization, a clearly structured and well-communicated procedure was required. As a first step, investment control and NWC analysis were used to anchor the principle of cash discipline within the organization. In addition, a causal analysis of the receivables management identified frequent weak points in the internal invoicing and invoice issuing processes. In addition to shortening payment terms and asserting them more aggressively, value creation potential was realized predominantly by streamlining process flows. In particular, the understanding of NWC and cash discipline was greatly enhanced, thanks to intensive training sessions for the technical sales staff.

Finding – your customers’ liquidity shouldn’t take precedence over your own

The impact of professionalized receivables management is often underestimated. Sometimes, the “customer is king” philosophy needs to take a back seat. Effective use of receivables management as a lever can, when correctly implemented, ensure both rapid liquidity and sustainable value creation. And often as not, it is not even necessary to talk to the customer – simply speeding up one’s internal invoicing processes is generally sufficient.

PROJECT RESULT


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