Hackett-REL: Top U.S. Companies See $72 Billion in Improved Working Capital

Annual survey also identifies an additional $450 billion in potential cash


Analyzing the poor European performance, Hackett-REL Europe President Andrew Ashby explained that with corporate liquidity being much improved, management attention seems to have shifted away from working capital towards growing the business and the bottom line. "Over the past few years, European companies have picked the low-hanging fruit in working capital, generating improvements by extending payment terms to suppliers and being more aggressive in collections. But now, with the economy on the rebound, companies seem to have shifted their focus toward growth and taken their eye off the ball of improving working capital management," said Ashby. "It is interesting that U.S.-based companies are finding a better balance between achieving growth while still driving operational improvements that result in lower levels of working capital — balancing gains in strength between the P&L and the balance sheet, therefore growing while delivering exponential levels of free cash flow versus the European companies."

Hackett-REL found that the top 1,000 U.S. companies achieved Days Working Capital (a measure of total working capital) of 50.4 days. Improvements came in all three areas that make up total working capital, with the greatest progress seen in receivables, as expressed by Days Sales Outstanding, which dropped by 3.9 percent. Days Inventory Outstanding saw a 2.9 percent reduction, and Days Payables Outstanding increased by 0.6 percent.

Of the 82 industry groups examined by Hackett-REL, 12 managed to post a double-digit improvement in working capital. Most improved sectors included cable broadcasters (46 percent reduction), oil (45 percent reduction), marine transportation (30 percent reduction), coal (19 percent reduction), and toys (19 percent reduction). The CFO article also features profiles of three companies and their successful DWC reduction efforts: Brightpoint Inc., a $2.1 billion distributor of mobile phones and other wireless products; Nucor Corp., a $12.7 billion steel company; and wireless communications company Qualcomm.


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