AREA OF EXPERTISE 02

Receivables and Working Capital Management

A receivable is the part of a company’s capital that is deployed with the customer.

01 — 09 SYSTEM MAP
  1. 01Know the Customer
  2. 02Manage the Capital
  3. 03Systematise Collection
  4. 04Manage Risk and Profitability
  5. 05Set the Limit
  6. 06Monitor the Risk
  7. 07Strengthen with Collateral
  8. 08Restructure and Resolve
  9. 09Recover and Learn

EXECUTIVE SUMMARY

Executive Summary

A credit sale makes part of the company’s capital available to the customer for a period of time. So the core question of receivables management is not only how much was sold, but how much capital was tied up, how long it stayed with the customer and when it returned to the company’s cash cycle.

Key Management Areas

4 topics
01

The size of receivables also shows the capital in use

If receivables grow faster than sales, the company’s working capital needs rise too. The size, ageing and concentration of the receivables portfolio are assessed alongside the company’s financial resilience.

02

Payment terms are also a capital allocation decision

Every extra day of payment terms granted to a customer means capital returns to the company later. The gap between supplier and customer terms creates the working capital gap the company has to finance.

“In a well-designed system, a company does not unknowingly become its customers’ bank.”
03

Open account is a controlled trading tool, not permanent financing

Open-account balances that keep rolling over and never close can, over time, become part of the customer’s working capital. This “open-account build-up” is made visible and manageable.

04

The receivables portfolio is managed beyond the total balance

Ageing, customer concentration, contractual terms versus actual payment dates, financing period and capital in use with the customer are tracked together.

WITH ALMERA

What changes when ALMERA comes in?

  1. 01The sales–receivables–cash conversion relationship and its effect on working capital are made visible.
  2. 02Receivables ageing, concentrations, open-account build-up and actual financing periods are analysed.
  3. 03A Receivables and Working Capital Management System is set up that measures the capital in use with customers.

THE ALMERA VIEW

A receivable is the part of a company’s capital that is deployed with the customer.
Real financial strength comes from a structure in which sales turn back into cash without consuming capital.

Frequently Asked Questions