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Cleaner (Balance) Sheets: The 2009 Working Capital Scorecard Hard times have inspired companies to wring lots of cash out of working capital. How much better can they get?

Randy Myers, CFO Magazine
June 1, 2009

It's All about Timing

George,

Thank you for your comment. You are correct that the year-end recession will have affected the CFO Working Capital survey results.

The results would indeed be different if we took the average of the four quarters rather than year-end balances. We've done other stories that do look at quarterly changes (see, for example, "Working Capital: Fourth and Goal"). But for 12 years now, our annual scorecard has always looked at full-year numbers.

We believe this is appropriate. We do not normalize the results for booms or for busts. If sales drop, companies still have an opportunity to manage inventory and receivables before year end, and the best performers will have done so.

Because we don't adjust the results for macro-economic changes, the trend data we report demonstrates which companies continue to manage WC well despite external pressures.

It is certainly true that some companies will show serious deterioration as a result of swelling inventories, lengthening receivables, or a precipitous drop in net sales that hit them late in the final quarter. Over time, however, we believe the trend data will continue to demonstrate who the top performers are.

Posted by Tim Reason | Aug 19, 2009 11:43 AM ET

Timing difference

I normally think the CFO Working Capital survey is very helpful in benchmarking performance.

I am very worried that the 2008 measures got trapped in the year-end recession. The measure uses full year sales versus the end of year balances in the three working capital components.

With the big year-end falloff in business, do we think this timing difference to full year sales still gives us meaningful figures?

Posted by George Hartley | Aug 19, 2009 11:11 AM ET

Practically Insightful WCM

A must read for a management students to get an insight into working capital issues/scorecard in the downturn-Prof.Gurbir S Khera-Finance & Management educator-Asian Business School(Delhi-NCR-thinkkhera@yahoo.com)

Posted by ProfGurbirCMA Khera | Jul 12, 2009 12:42 PM ET