DemandPoint architects Demand Flow® Technology solutions for free cash flow, the cash conversion cycle and reducing working capital. We help you address the following questions:
- Is your cash flow adequate and at peer level?
- Is cash flow stable throughout the year and the last 3 years?
- What are the top 3 consumers of cash in your company?
- What is your cash conversion cycle?
- Are capital expenditures under control?
- Are your receivables, inventory and payables at peer level?
Driving Improvements in Cash Flow
Cash is the lifeblood of any business and successful enterprise over time. The combination of Growth, Competiveness and Infrastructure/Process initiatives ultimately drive free cash for shareholders and owners. Cash can be tied up and bottlenecked in many locations within a value chain, particularly in the manufacturing side of the business but with the correct approach to diagnosing the problems, the science of DFT can help you free up much needed cash flow and get the entire enterprise running smoothly.
Free Cash Flow
Free cash flow is cash flow from operations available for use in development and implementation of future enterprise programs such as divestures, capital spending, amortized items, etc. Spending $1M in capital to achieve $1M in revenue with associated project costs and working capital is a negative free cash flow result as an example. DemandPoint specializes in optimizing free cash flow through the science and mathematics of DFT and appropriate educational and engagement services. These sustaining routines are both strategic and tactical based on integrated customer, cost and cash elements for total production time and customer needs across the value chain.
Cash Conversion Cycle
The cash conversion cycle is a key benchmarking element a business can use to compare the more real- time use and efficiency of working capital. It is days calculated as a sales receivable less the net of days cost inventory and payables. A business with a 100-day cash conversion cycle is inherently more risky and cost inefficient than a business with a 15-day cycle. Even businesses with very long supply chains (offshore) can achieve less than 15 days cash conversion cycles with DFT.
Working Capital
Working Capital refers to the money tied up by the relationship between accounting payables, accounts receivable and the inventory required to produce a finished good. Instead of companies trying to constantly bring in new revenue sources, many are learning that it is much more effective to find ways to extract cash internally by becoming more demand-driven and focusing their efforts in a broader perspective. There are many factors that can weigh on this issue such as sales visibility, material logistics, cash conversion cycles, customer/supplier integration but all of these are tied together and a framework must be created to understand how working capital optimally figures into the bottom line. DemandPoint specializes in fulfillment and supply chain strategies and has a deep history of freeing up working capital for many top organizations around the world using the tools of DFT.