Cheapest source of incremental cash flow potentially being overlooked
TORONTO, Feb. 20, 2013 /CNW/ - While 80% of Canada's financial
executives remain focused on increasing operational efficiency and
reducing costs this year, only 53% are looking at ways to improve
working capital. That could be a missed opportunity, according to a new
Canadian Financial Executives Research Foundation (CFERF) study
sponsored by Ernst & Young.
"The importance of effective working capital management is often
overlooked," says Michael Conway, Chief Executive and National
President of Financial Executives International (FEI) Canada. "Skillful
cash management and good cash forecasting are keys to the successful
financing of any enterprise."
Working capital optimization, published by CFERF, the research arm of FEI Canada, found 48% of
companies undertook a working capital improvement program and, of those
that did, 69% said they achieved a high success rate. Although
businesses remain highly focused on cost reduction (80%), profitability
improvement (75%) and system implementations (50%), the findings
suggest that a balanced approach to managing competing priorities can
generate significant returns.
"The impact of cash flow should ultimately be ingrained in all
initiatives," explains Simon Rockcliffe, Senior Manager, Working
Capital Advisory Services at Ernst & Young. "Anything from
renegotiating supplier contracts to reducing manufacturing waste can
have an impact on working capital performance, so it makes sense to
ensure that impact is considered and the results optimized, both in the
short- and long-term."
The survey also found companies that tended to be more proactive - by
executing improvement initiatives, reviewing performance more
frequently and reporting more accurate cash forecasts - were the ones
that placed high importance on working capital management.
"Too often, working capital management has become a reactive, month-end
or even window dressing exercise," adds Rockcliffe. "While there's no
silver bullet for improving working capital performance, every
organization should adopt a tailored approach if they hope to enhance
overall business performance."
"Finance executives have many competing priorities moving into 2013 and
management's time will become ever more precious," adds Conway. "But
ensuring a focus on cash and working capital can have substantial
payback, rapidly generating liquidity that can be reinvested into the
About the survey
The study comprises the results of an online survey of Canadian
financial executives in November 2012. Further insights were gathered
at executive roundtables in Toronto and Montreal. More than half (56%)
of respondents were CFOs, and 17% held the title of VP Finance.
Respondents were drawn from a wide range of industry groups and
sectors. Of respondents, 55% were from private companies, and 35% from
About the Canadian Financial Executives Research Foundation
CFERF is the non-profit research institute of FEI Canada. The
foundation's mandate is to advance the profession and practices of
financial management through research. CFERF undertakes objective
research projects relevant to the needs of Canada's senior financial
executives in working toward the advancement of corporate efficiency in
About Financial Executives International Canada
FEI Canada is the all-industry professional membership association for
senior financial executives. With 11 chapters across Canada and 1,800
members, it provides professional development, thought leadership and
advocacy services to its members. The association membership, which
consists of chief financial officers, audit committee directors and
senior executives in the finance, controller, treasury and taxation
functions, represents a significant number of Canada's leading and most
For more information, please visit feicanada.org.
About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and
advisory services. Worldwide, our 167,000 people are united by our
shared values and an unwavering commitment to quality. We make a
difference by helping our people, our clients and our wider communities
achieve their potential.
For more information, please visit ey.com/ca.
Ernst & Young refers to the global organization of member firms of Ernst
& Young Global Limited, each of which is a separate legal entity. Ernst
& Young Global Limited, a UK company limited by guarantee, does not
provide services to clients.
SOURCE: Ernst & Young
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