Working Capital - Fast Cash

Issue

Capital requirements were becoming increasingly important to this mining company to meet debt requirements and to improve economic results during a recent economic downturn and related drop in commodity prices. Having experienced significant profitability in prior periods, the company needed to change a culture accustomed to significant revenue, large profits and corresponding positive cash flows. Management was challenged to quickly improve working capital by extracting cash from the supply chain. The Highland Group was enlisted to find “Fast Cash” working capital improvements. (Additional opportunities to improve working capital and reduce costs would be addressed in a subsequent phase of work.)

Highland Approach

A detailed analysis revealed the immediate changes that were needed in business practices and operating procedures. The first step involved changing a culture rooted in paying vendors early. Rapid and measurable financial results were realized through the implementation of new processes around the purchased order and payables functions, staff training and the development of a management dashboard with nine key performance indicators (KPIs) to ensure the sustainability of results.

Actions Taken

• Partnered with client teams to implement a System For Managing Accounts Payable.
• Improved processes for operating Accounts Payable and for monitoring and managing results.
• Captured Accounts Payable “Fast Cash.”
• Reduced carrying costs and transaction costs with increased application of early payment discounts.
• Established Category Analysis processes in conjunction with Contract Management processes.
• Established policies, procedures and metrics to manage contractors.