Liquidity and working capital advisory

Dynamic and disrupted markets, geopolitical uncertainty and ever-growing corporate transparency are putting increasing pressure on companies’ liquidity and cash flows. We help companies forecast, monitor and free up cash via robust, actionable methodologies.

Related topics Strategy and Transactions Strategy by EY-Parthenon Restructuring and Turnaround

The team

Peter Kingma

Peter Kingma

EY Americas Working Capital Consulting Services Leader

Nick Boaro

Nick Boaro

EY-Parthenon Partner, Ernst & Young LLP

Sven Braun

Sven Braun

EY-Parthenon Principal, Ernst & Young LLP

Featured thinking

How to drive operational resilience with better cash management

Peter W. Kingma, Sven R. Braun, Eidji Braghin 5 Dec 2022
Woman man catamaran

What the EY liquidity and working capital team can do for you

The global network of dedicated working capital EY professionals helps clients identify, evaluate and prioritize actionable improvements to liberate significant cash from working capital through sustainable changes to commercial and operational policies, processes, metrics and procedure adherence.

We can assist organizations in their transition to a cash-focused culture by identifying areas for improvement and helping to implement the relevant metrics. EY teams can also help businesses to address immediate and short-term liquidity challenges of the type generated by threats of covenant breach or revenue disruption. In addition to cash performance transformation, we also support the acquisition and disposal agenda of our private and corporate clients, securing value through a sale process and identifying potential cash risks and upsides on potential acquisition. 

Working capital improvement initiatives create sustainable value. In addition to increased levels of cash and enhanced cash management process and tools embedded in normal operating routines, significant cost benefits may also arise from productivity improvements, reduced transaction and operational costs, and lower levels of bad debts and inventory obsolescence. Focusing on working capital can help organizations to work collaboratively and cross-functionally and improved processes can also improve quality of services, both internally and externally. 

We use a wide range of analytical techniques to rapidly identify drivers of opportunity and areas for further focus, including using interactive digital visualizations. Our analytics identify, evaluate and communicate key issues to management and the wider business. These can be provided on an ongoing basis, hosted and managed by us.

Wherever you do business, our working capital professionals can be there to help.

The benefits of strong liquidity and working capital management

  • Cash flow generation

    • Improve cash flow management and reduce liquidity risk through a working capital management strategy 
    • Release cash from the balance sheet and improve working capital for investment in acquisitions, market expansion, innovation, and/or business transformations
    • Support value protection through rapid cash generation where there is an event-driven, short-term liquidity need
    • Demonstrate effective control to potential investors
    • Identify and drive additional value from deal activity
    • Lower financing costs by managing cash flow effectively, and de-leveraging the business
    Related case studies

    • US chemicals company

      Background

      • Chemicals company carried heavy dividend and share buy-back commitments, debt payments and investment in business transformation at onset of the global COVID-19 pandemic

      Services provided

      • Sizeable opportunity was identified to harmonize working capital performance across business units and regions including; receivables (terms, billing, collections), payables (terms, finance policy and execution), inventory (RM, Intermediates, FG, MRO)

      Benefits achieved

      • $800m in cash from payables and inventory through process changes, benchmarking, metrics and change management over multiple years
      • Working capital transformation and establishment of a cash culture to achieve sustainability

    • US private equity company

      Background

      • Private equity firm with >20 portfolio companies was targeting $1b in cash flow improvements
      • Lack of focus on working capital management due to poor strategies, policies, and processes across order-to-cash (OTC), procure-to-pay, and inventory management

      Services provided

      • Collaborated with PE sponsors and Portco executives to identify and provide AR, AP and inventory optimization programs across portfolio companies

      Benefits achieved

      • Delivered approximately $500m in cash benefit over an 18-month period through operational improvements at 5 portfolio companies

    • UK manufacturing company

      Background

      • New management team focused on driving latent value out of the business
      • Legacy focus on growth, often by acquisition, with more limited focus on integration
      • Limited divisional management attention on, visibility of or accountability for operational cash flow performance

      Services provided

      • Established tactical focus on cash as a clear priority for the business and as part greater part of the culture

      Benefits achieved

      • Identified approximately £400m of working capital improvement opportunities, with about £185m delivered in the first 15 months

    • South American food and beverage company

      Background

      • Leader in the food and beverage industry, with a competitive position in the South American region, faced significant pressure to help optimize cash flow generation and working capital position after multiple acquisitions

      Services provided

      • EY professionals led a detailed diagnostic of 3 workstreams (order-to-cash, procure-to-pay and forecast-to-fulfill) and designed associated initiatives to capture significant cash opportunity

      Benefits achieved

      • Delivered $82m in working capital benefits from cash release across 3 workstreams and an additional $4m P&L opportunity from reducing lost sales due to stock-outs

    • Israeli pharmaceuticals company

      Background

      • Company with ownership in various entities around the globe lacked a cash driven organizational culture
      • Cash flow had declined following a period of high M&A activity

      Services provided

      • Identified liquidity resources to improve cash flow, including development of AP policy and process standardization

      Benefits achieved

      • Delivered $400m in working capital benefits from total spend within a year

  • Improved operational performance

    • Drive more efficient processes by adopting leading practice cash management solutions across the supplier and customer base, in turn improving working capital
    • Help improve supply chain resiliency, through robust risk policies, alternative sourcing, and enhanced visibility across the cash conversion cycle
    • Make impactful working capital management decisions based on a broad working capital strategy
    Related case studies

    • US food producer

      Background

      • Global fresh and packaged food producer faced bond refinancing and one-off legal costs resulting in an urgent cost and cash flow focus

      Services provided

      • Executed a 6-week cost and cash diagnostic covering across G&A, AR, AP and inventory, followed by an 8-week “quick win” implementation project to rapidly realize significant and sustainable benefit prior to year-end

      Benefits achieved

      • $200m cash release and $24m G&A cost reduction opportunity - $70m benefit targeted for delivery by the end of first quarter, with a further $130m for the rest of the year

  • Cash culture and sustainability

    • Help make cash and liquidity management a strategic focus, with the entire organization engaged and incentivized to drive improvement
    • Create discipline through cash flow forecasting, with broad cash flow controls and evaluation processes in place
    • Promote global liquidity and cash management maturity across the organization
    Related case studies

    • US aerospace and defense company

      Background

      • Aerospace and defense company had a strong balance sheet but looked to get ahead of secular headwinds

      Services provided

      • Established a cash management office to improve visibility to inventory, AR and AP performance and prioritize working capital projects

      Benefits achieved

      • Identified $5b in cash opportunity, including inventory projects targeting an additional $1b of additional cash
      • Delivered $1.5b in cash benefit in the first 9 months of journey

    • US pharmaceutical company

      Background

      • Pharmaceutical company with a new CFO looked to improve balance sheet performance

      Services provided

      • End-to-end cash management through establishment of a cash leadership office to drive cash culture and to fuel future investments

      Benefits achieved

      • Delivered >$6b in cash improvements across all addressable aspects of the balance sheet and over $30m in P&L improvements
      • During the multi-year, multi-faceted global working capital program, client was transformed from industry laggard to industry leader in cash management

    • Canadian mobility company

      Background

      • Equipment distributor looking to improve balance sheet efficiency and shareholder value. Deterioration in end-customer markets was increasing pressure on cashflow
      • In house attempts had been made at improving trade working capital, but progress plateaued under current initiatives

      Services provided

      • Initial assessment identified $300m cashflow target across global receivables and payables
      • Supported procurement strategy development and roll-out, as well as design and implementation of a global OTC software solution

      Benefits achieved

      • Development of a set of defined and resourced priority projects driving >$100m in realized benefits

  • Stronger market perception

    • Gain more insight into managing cash flow to support quality of earnings and underpin company valuation
    • Improve relationships with customers and suppliers through more effective processes and performance monitoring
    • Build confidence in financing relationships through improved liquidity management and ability to meet debt covenants
    Related case studies

    • US cosmetics company

      Background

      • Luxury cosmetics company had limited penetration of working capital policies, granular metrics, goal setting or linked management incentives, particularly at the affiliate level

      Services provided

      • Evaluation of AP and AR performance by region and by market relative to peers
      • Analysis of extending supplier terms as part of a broader supply chain financing effort

      Benefits achieved

      • Identified total opportunity of $260m to $390m across AR and AP based on changes to trigger/frequency, terms alignment, improvement in days to pay/collect and supply chain financing

    • US life sciences company

      Background

      • Life sciences company looked to improve balance sheet performance after a large acquisition had pushed them into a net debt position with days payable outstanding lagging peers

      Services provided

      • Drove global AP program to extend payment terms and standardize AP processes for both trade and non-trade working capital, including examples such as royalties, rebates and chargebacks
      • Supported RFP process and selection for a supply chain finance (SCF) program, followed by SCF organization design, stand-up, and global expansion strategy in line with client’s corporate culture and goals

      Benefits achieved

      • Delivered over $2.2b in sustainable benefits and 160+ suppliers in SCF program

  • Navigating cash and liquidity constraints

    • Strengthen short term cash flow forecasting disciplines and tools to support near-term visibility and control over cash
    • Use medium-term liquidity forecasting to understand headroom, liquidity events and funding challenges
    • Utilize focused cash release initiatives to drive additional cash flow and improve forecast cash profile
    • Employ effective stakeholder management around the group’s overall cash position (board, lenders, investors, etc.)
    Related case studies

    • Global airline services company

      Background

      • This global company was heavily impacted by COVID-19 restrictions. The business needed to radically improve its immediate liquidity position and develop shot-term cash flow forecasts to remain solvent

      Services provided

      • Developed a baseline to challenge and drive cash and liquidity improvements, and a prioritized list of cash measures
      • Provided clarity on the cash impacts (and funding requirements) of possible COVID-19 scenarios

      Benefits achieved

      • Active cash management provided crucial time to secure the group’s financial restructuring, delivering a de-levered and strengthened balance sheet, and significant liquidity from a new term loan and existing cash of €500m
Results

The global EY network of member firms has facilitated more than US$100 billion of increased cash flow for our clients over the past 10 years. We have experience in building and analyzing cash flow forecasts to either clarify short-term liquidity requirements or help navigate medium- to long-term fund flows.

We leave businesses with a revised cash culture and focus embedded into their governance and operating structures, with the tools, metrics and training required to drive continuous improvement.

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