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Protecting working capital is a lifeline for businesses

The edict that ‘Cash is King’ is never truer than in times of uncertainty. As the impact of COVID-19 brings the resilience and wellbeing of your people front of mind, there’s also an increased need for companies to protect liquidity. Particularly for those in a high leverage model, reacting fast to the changing cash and working capital needs is a crucial lifeline.

Across all sectors there is a rapid shift in working capital requirements, driven by both disruption of supply and demand. Normal lead times and replenishment frequencies are elongated even for regional supply chains, meaning safety stock and inventory policies need to be adapted. Payment moral as well as credit worthiness and insurability are impacting the ability to get paid or trade.

There is a clear need to take rapid action to change operational ways of working to protect working capital and ensure a more accurate cash flow forecast in these uncertain times.

Key actions you can take

Stand-up central point of control and visibility

For example; war room / cash cockpit

  • Deploy pragmatic analytics across cash in / cash outflows to assist management decision making

  • Set up tactical cash management governance framework to enable rapid escalation

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Bolster cash collection capability

  • Deploy targeted analytics to prioritise and focus the efforts of operational teams

  • Rapidly stand up back up capacity to mitigate potential impacts on shared service centres

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Control the flow of outgoing payments

  • Assess supply chain risk and supplier criticality

  • Establish cash conservation levers

  • Engage suppliers and review agreements and supply across all cash levers

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Supply chain visibility

  • Establish visibility on global inventory flows

  • Recalibrate short term replenishment triggers and controls in the face of potential lead time changes and demand volatility

  • Assess security over your supply chain and potential substitution options

  • Implement contingency replenishment process and controlled intake

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Scenario planning

  • Identify key sensitivities impacting working capital requirements

  • Prepare and run short term cash forecast reflecting key working capital changes

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To weather the current storm, it is particularly vital for you to adjust operational behaviours and processes for working capital at pace.

If you want to talk through any working capital or liquidity matter on your business then please contact Daniel Windaus, Working Capital Partner.

Contact us

Daniel Windaus

Daniel Windaus

Partner, PwC United Kingdom

Tel: +44 (0)7725 633420

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