Andersch | Reduce capital commitments

Overview

Your goal

Identify measures to boost efficiency or to reduce the debt to equity ratio by optimizing the use of internal financing resources. Achieve an understanding of the company's capital commitments and how these may be usefully released. This requires a catalogue of measures and an organization that is able to implement them. In addition, you require the tools to effectively manage your working capital.

Our services

We first analyze the leading drivers for capital tie-up and use these to define and prioritize appropriate measures. Together, we draw up robust, measurable criteria for targets and prepare an action plan. In the transition phase, we provide support in the form of tools that use ERP data to deliver up-to-date progress reports and assist the organization. We also provide expertise and resources as required to assist with the implementation.

Results

Our analysis shows the areas where capital commitments can be reduced. We provide a dedicated action plan with prioritized measures. Together with the company, we systematically reengineer the processes that lead to high levels of capital commitment. With regards to liquidity management, we initially focus on the measures that will provide the highest benefit in the shortest time.

Benefits

Detailed analysis:
Our consultants are experienced in breaking down complex situations to their essentials – and using this insight to prioritize measures that generate success.
Bespoke tools:
During and after implementation, ongoing monitoring and management is essential for a successful reduction of working capital. If needed, we provide solutions that master with Big Data requirements.
Visible achievements:
Drawing on experience gained in a wide range of restructuring projects, all of our clients to date have managed to release a significant amount of committed capital.

Action

Common signs that a "review" of a company’s capital commitments is overdue.

Reducing capital commitment is a key factor in becoming more competitive in your industry. As a result, working capital management should not be viewed as a task for corporate finance but should be given strategic priority.

A need for action is highlighted by the following:

Return on capital employed (ROCE) has been in continual decline over recent reporting periods or is below the industry average
An increased need for external funding
Supply bottlenecks in the supply chain
Inventory held is increasing
An increase in receivables
The liquidity forecast indicates a funding need
Debt service is at risk
The company has suffered a rating downgrade

Approach

Approaches to reducing capital commitments

We review the entire working capital cycle with the aim of reducing the company’s capital commitments, and increase the company's liquidity and value:

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Possible approaches include the following:

Creating visibility over the company’s fixed and current assets with a view to optimizing its capital commitments
Optimizing receivables management (e.g. by adjusting customers’ payment terms or introducing factoring)
Reducing inventory levels by optimizing and/or automating production and logistics processes or by revising the product portfolio
Improving creditor management (by optimizing purchasing processes or extending payment terms)
Assessing and implementing measures to dispose of non-core assets (e.g. through sale-and-lease-back)