Working Capital – Early Warning Signs

Working Capital – Early Warning Signs

Payables (Creditors / Suppliers)

  • Low creditor days KPI
  • Lack of KPIs, targets and reporting
  • No control over payment timing
  • Early and / or late payments
  • Large spread of payment terms
  • Poor supplier relationships
  • Lack of preferred suppliers
  • No formal Purchase Order approval process
  • Retrospective Purchase Orders
  • Lack of visibility on spend
  • No formal review / approval of supplier master data
  • Decentralized invoice receipts
  • High level of rejected invoices
  • No root-cause elimination of reasons for invoice discrepancies

Inventory (Stock)

  • High stock days KPI
  • Over 5% of inventory more than 90 days old
  • Over 40% of inventory 30-90 days old
  • Annual inventory write-off greater than 5% of COGS
  • Poor stock visibility / demand forecast
  • Poor partnering relationships
  • Absence of relevant data
  • Periodic lack of sufficient storage space
  • Increasing delivering delays
  • Large difference between administrative and physical stock levels
  • Wide variance in inventory turnover amongst terminals and amongst product
  • Large quantities of obsolete items

Receivables (Debtors / Customers)

  • High debtor days KPI
  • Overdue receivables more than 10%-15% of total receivables
  • Days Sales Outstanding higher than competition
  • Level of bad debt write-off more than 0.5% of sales
  • Unbilled not monitored
  • Unbilled more than 1 day (without good reason)
  • Billing runs less frequent than business standard (without good reason)
  • Disputed invoices not flagged within system
  • Disputes not categorized, with no root-cause elimination of reasons for invoice discrepancies.

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