Cash & Working Capital Optimization

Liquidity is key for businesses to run daily operations as well as fund future growth.

Most businesses have significant cash tied up in working capital, including trade receivables, trade payables, inventories and non-trade items. By releasing cash from working capital, companies can unlock funds for growth, transformation, M&A, deleveraging or dividends.

Besides improving the financial position, working capital optimization means business processes become leaner and more effective. This drives operational improvement, cost benefits and makes the organization easier to do business with for customers and suppliers.

Sustainability should be at the core of any working capital optimization initiative. Common pitfalls include overreliance on tactical levers for short-term gain, clustering efforts in the Finance function only and focusing on addressing symptoms rather than root causes.

KPMG in Vietnam and Cambodia deploys a proprietary hypothesis-based framework, covering more than 150 hypotheses to optimize working capital from an operational, financial and structural perspective. Combined with a full suite of analytical working capital tools and a proven track record across all sectors, this allows us to partner with our clients to identify and deliver tangible results at deal speed.

• Our client was a leading grocery retailer seeking to improve its net debt position through working capital enhancements. They had outperformed most other grocers in terms of revenue growth in recent years and had recently acquired another supermarket chain to grow the store network.
• Yet, this rapid growth had come at the expense of cash and working capital management. They wanted to conduct a holistic review of potential working capital opportunities, on a standalone basis and by creating synergy with the new acquisition.
• Our client had set a target to improve the cash balance by $100m by year-end through focusing on accounts payable and supplier income receivables optimization.

• We conducted a review of 12 months of invoice level payables and supplier income receivables data, benchmarking payment terms, payment processes and supplier income policies against proprietary insights and industry best practices.
• Our diagnostic identified c. $200m of opportunities across goods for resale spend (“GFR”) and goods not for resale spend (“GNFR”). This included 3 quick wins (c. 3 months to implement) and 5 medium term opportunities (c. 6 – 9 months to implement).
• Following the diagnostic, we supported our client all the way through implementation planning, implementation and benefit tracking. 
• In the implementation phase, we supported our client to navigate payment terms legislations and industry norms; segment the supplier base to establish a bespoke strategy for small, medium and large suppliers; prepare supplier negotiation materials; evaluate financial impacts for our client and their suppliers; and provide project management for the system implementation of the initiatives.

• Our rapid diagnostic identified c. $200m of total potential working capital opportunities. By year-end, we helped our client to deliver c. $150m of these initiatives, exceeding our client’s cash improvement target for the year.
• Within another six months, we had delivered a total of $250m working capital improvements for our client, whilst focusing on strengthening supplier relationships and enhancing fairness and transparency across the supply chain.