Cash in the cloud

Cash in the cloud is the latest in a series of working capital (WC) management reports based on EY research and analysis.

The top 70 US technology companies in 2014 show an improvement in WC performance from the previous year. Against a background of solid revenue growth, the industry’s cash-to-cash (C2C) fell by as much as 11% from its 2013 level.

EY found that WC management still receives far greater attention than in the past, as companies continue to take rigorous steps to drive cash and cost out of WC.

However, a comparison of our results between and within different technology segments reveals a far from uniform picture, with some businesses continuing to improve their performance, but others failing to do so. Overall, only half of the eight technology segments and 51% of companies analyzed across all segments reported a lower C2C in 2014 than in 2013.

In addition, the WC results reported for 2014 benefitted from temporary positive currency impacts, resulting from movements in US dollar exchange rates.

These overall findings suggest technology companies seeking further WC gains will need to embrace more substantial and sustainable changes in the way they do business and manage their WC. The underlying problem is that the technology environment is becoming increasingly complex to navigate.

For many organizations, this means deciding on the appropriate balance between growing their business (organically and through acquisitions) and improving their margins, while also driving their return on capital and increasing cash returns to their shareholders.