The Hackett Group’s Rapid Cash Release Framework, below, consists of three phases: optimizing cash flow visibility, setting goals and executing the plan.
Each phase should take around two weeks. Thus, the framework represents a six-week program to quickly release cash tied up in working capital and maximize current credit and financing opportunities.
Reference position: visibility of cash flow
Goal: Collect transactional data to benchmark against your peers and measure the performance of the company’s payment terms against peer organizations.
- Review and assess the impacts of interest rates, including adjusting the treasury strategy to costs.
- Terms of reference by supplier expenditure and customer category to measure performance.
- Examine the risk / solvency profiles of customers and suppliers.
- Carry out a segmentation between debts, receivables and stocks.
- Perform a quick inventory review (for example, excess inventory per storage unit (SKU) and slow moving and obsolete inventory).
Map and discard: define targets
Goal: Identify priority payments and critical suppliers, customers and drivers. In other words, map the leverage within your financial supply chains.
- Evaluate your debt, assess your capital structure, and model different financing / interest rate scenarios.
- Map the potential impacts of available financing solutions (eg, debt factoring) and supply chain financing options.
- Evaluate the credit terms and negotiate the best terms that are also reasonable enough not to seriously affect your business partners.
- Map strategic suppliers that need to be prioritized in Accounts Payable (A / P) workflows.
- Quantify the impacts of inventory factors on cash flow, including inflated buffer stocks, demand planning errors, and slow moving inventory.
- Model immediate tradeoffs and possible trading tactics that could speed up payments across your entire accounts receivable (A / R) portfolio.
Execute the plan – pull the levers
Goal: Launch a cross-functional team to execute short- and medium-term cash conversion cycle goals.
- Launch teams to stop term leaks and accelerate resolution of high value unbilled receivables and invoice disputes to get immediate payment.
- Accelerate financing and liquidity products to achieve strategic goals.
- Develop daily forecast and visibility by understanding variance analysis by industry / product by geographic area.
- Establish a team rhythm to continuously monitor A / R, A / P, and inventory metrics.