2016 Annual Global Working Capital Opportunity

€ 1.1 trillion cash opportunity

We have reviewed the working capital performance of more than 13,000 businesses over a 10 year period. Our review identified significant opportunities to release cash from one of the cheapest sources available, working capital.

Working Capital performance is worse than pre-crisis levels, consuming more than €300 billion extra cash

During the last financial crisis, businesses sought to protect liquidity by tightening up working capital. By implementing short term tactical initiatives, inventory levels were cut and prompt payments were demanded. But as early as the following year, these improvements were reversed and since 2008, working capital has deteriorated by €300billion.

The global reaction to the UK’s vote to leave the EU has been significant. Markets around the globe have been impacted and the long term impacts are uncertain. Working capital sits at the heart of global trade which makes getting a grip on working capital performance now, as important as ever.

As businesses review working capital in this uncertain environment, they must make sure they implement sustainable improvements, which will benefit them in years to come. If they do not, there is a chance history could repeat itself.

Key findings at a glance

Revenues and working capital days trend

Over the last 10 years, global working capital performance has progressively deteriorated  indicating a lack of management focus on what remains one of the cheapest sources of cash. The last two years have seen tighter control on working capital as demonstrated by the improvements in 2014 and 2015 of 0.3% and 1.6% respectively.

However, performance of working capital globally is still significantly worse than it was 10 years ago. At least when it comes to working capital, the lessons form the  financial crisis have not resulted in a lasting increase in focus.

Working capital is integral to a company’s operation and can provide a real competitive advantage. Releasing cash from working capital is a value creation process, as it directly impacts a company’s free cash flow. Companies with poor working capital performance require more funding to grow so it is in management’s interest to manage performance closely.

Looking at drivers globally, the picture differs across days sales outstanding (DSO), days payables outstanding (DPO) and days inventory on-hand (DIO).

Over the last decade, DSO achieved a one day improvement, although performance has stagnated since 2012.

DPO is at a record best performance, exceeding 2006. The improvement in DPO in 2015 suggests companies are making increased efforts to manage their supplier base. This also suggests a stronger focus on year-end reporting; it is easier to achieve an improvement in DPO by postponing payments, rather than tackle receivables and inventory.

The increase in working capital investment has mainly been driven by stock levels, which increased by nearly four days, primarily in the aerospace & defence, engineering & construction and industrial manufacturing sectors. These sectors account for 30% of global inventory.

DSO, DPO and DIO trend

Key global findings

  • Liquidity availability
  • Sector analysis
  • Geographic performance
  • Corporation size
  • Link to efficiency

higher working capital consumption for non-investment grade companies

Liquidity availability

While cash reserves are at their highest levels for 10 years, net debt ratios have also significantly increased since 2010. Despite the uncertainty caused by the UK's vote to leave the EU, the debt markets remain open to companies. Interest rates and debt yields are at low levels, with an abundance of investor liquidity available and a broad array of debt products for companies to choose from. However, accessing working capital trapped in their business would provide a cheaper source of cash.

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of all sectors experienced a deterioration in working capital

Sector analysis

We reviewed working capital performance across 17 sectors and found a wide spread in performance, with the engineering and construction having the highest number of working capital days.

Whilst working capital consumption is linked to the industry within which a company operates, businesses in all sectors continue to show a significant variation in performance.

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deterioration in working capital amongst E7 nations

Geographic performance

Over the last decade, the E7 nations' working capital has deteriorated by 11%, whilst G7's working capital performance remains unchanged.

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Smaller companies continue to lag behind their larger counterparts

Corporation size

When it comes to working capital performance, big is beautiful. On average, small enterprises have more than double the working capital ratio of large corporations.

This gap is not only driven by negotiating power, but also by the level of focus on cash, as well as by the infrastructure and investment in processes and systems.

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Investment in key functions does not necessarily translate into better working capital performance

Link to efficiency

There has been an increase of selling, general and administrative expenses over the last 10 years following the increase in net working capital days. All sectors show a significant spread between top and bottom performers, whereby top performers tend to better at balancing their expenses according to their revenue changes.

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Daniel Windaus
Partner, UK
Tel: +44 (0) 7725 633 420

Glen Babcock
Partner, UK regions
Tel: +44 (0) 7711 153 138

Rob Kortman
Partner, Germany
Tel: +49 (0) 1709 879 253

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This study provides a view of global working capital performance and is based on the research of the largest 13,000 listed companies worldwide. The financial services, real estate, insurance and government services are excluded. All companies included have a turnover of over €100m. These figures have been downloaded in a standardised format from S&P Global Market Intelligence. 
Net working capital % measures working capital requirements relative to the size of company. The basis of the calculation (accounts receivable + inventories - accounts payable) / sales.


Companies have been assigned to countries based on the location of their headquarters. Although a significant part of their sales and purchases might be realised in that country, it does not necessarily reflect typical payment terms or behaviour in that country. 
As the research is based on publicly available information, all figures are financial year‑end figures. Due to the disproportionate efforts to improve working capital performance towards year‑end the real underlying working capital requirement within reporting periods might be higher. Also, off‑balance‑sheet financing or the effect of asset securitisation have not been taken into account.