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Back to the Grindstone on Working Capital Management

Gains companies made a few years ago have stalled, reflecting the difficulty of improving processes throughout the company.

By Susan Kelly | Updated on June 13, 2013
While the recession inspired big gains in the working capital metrics of U.S. companies in 2009 and 2010, since then progress has stalled, according to consultancy REL.

Working capital measures the extent to which a company’s liquidity is tied up in its receivables, payables and inventories. When the economy slowed, companies were motivated to squeeze as much liquidity out of those areas as they could.

“During the recession, working capital dramatically improved,” said Dan Ginsberg, an associate principal at REL, a division of the Hackett Group. Companies increased the speed at which they collected from their customers, extended the amount of time they took to pay their own bills and reduced their inventories, he said.

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