Our client work over the last 10 years has been in finding and reducing working capital across a number of sectors and technologies including after or during implementation of new ERP.
Working capital management and the operating processes that enable companies to optimise cash flow from inventories, receivables and payables are lost in focus.
The main reasons we find are:
- System design is not based on leading practice working capital processes. Rather a vanilla version of the software application
- Detailed cross-territory operations require more complex solutions than single country operations. When these happen in the same group, the complexity can impact working capital.
- User training concentrates too much on operating the system and not operating the processes that are now supported by a new system. Many new activities and transaction options are enabled by new ERP systems – but do they drive down working capital?
- Supply chain algorithms covering stock settings for lead times, safety stock and cycle times and order quantities, must be calculated and set in new systems to optimise performance.
- Payment run optimisation for suppliers and collection routines for customers can be streamlined too much or over complicated too much in new ERP systems
- Sufficient hands on support in new system supported operations is not provided
- Management performance reporting on working capital is underdeveloped.
Clients have to focus on reducing the high cost of systems implementations by reducing deviation from standard, to enable lower cost and straight forward future upgrades and reduce expensive development time.
Developing the right processes for your company for working capital management in advance of new ERP solutions is vital. It will ensure the right processes are in place and additional cash from working capital will help fund ERP.