Driving value creation through a working capital assessment

Every business owner, CEO or entrepreneur has their own unique ambition. It may be that the business thrives across generations, or looks to expand internationally to accelerate growth. Whatever these ambitions may look like, in many cases private businesses need cash to fund them. While private equity and loans are viable funding options, private companies should first look inside their own business for the desired money. There may be cash a company can tap into that it never realized was available.

A working capital assessment (WCA) can help private businesses understand how effectively they are managing liquidity. It provides valuable insights into overall working capital performance, targets areas for releasing cash and highlights areas for improvement. In simple terms, the WCA is a roadmap for greater visibility and predictability of cash flow.

How a WCA Works

A WCA helps find the cash to fund future investments by focusing on accounts payable, accounts receivable, inventory and other working capital items through quantitative and qualitative methods, including:

• Transaction-level data analytics
• Comparison of current performance with leading practices
• Interviews across various functions and departments
• Analysis of processes for managing capital

This in-depth analysis provides a clear view of cash flow and performance drivers. Businesses can use the insights gleaned from the WCA to release cash to fund growth-driving transactions, pay down debt, or sustain the business during slow times.

After undergoing a WCA, a business may realize there is no need for outside funding; the business is providing all the cash it requires. Additionally, the performance improvement opportunities revealed in a WCA can drive operating efficiencies for the longer term, creating a stronger competitive position, which creates real value.

In my role as EY Global Assurance Private Client Services Leader, I work directly with private businesses to help them grow their businesses. Contact me to learn how a WCA can help provide more options for growth.