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.

Explore other chapters and guides