Example of Working Capital in Agriculture

example of working capital in agriculture

We’ve worked on a number of Working Capital Improvement and Management Projects over the last 15 years – one example of working capital in agriculture we can share involved a Terms Reduction Project for a Leading Global Drip Irrigation Manufacturer.

Global AR Reduction

Company – Leading Global Drip Irrigation Manufacturer

Project Description – Terms Reduction

Location – Global

Working Capital Issues

  • The company had stretching growth targets but the AR balance was increasing faster than would be expected from the level of growth.
  • Overdues were high and customers were demanding longer payment terms to match the main competitors.
  • There was a widely held view amongst sales staff that customers of irrigation systems were not able to pay until they had sold their first irrigated crop. Hence long terms and late payment was tolerated.

JustOne Actions Undertaken

  • JustOne trained 7 Internal Consultants (ICs) in the technical, project management and change management aspects of the project.
  • JustOne implement the changes in Israel with the ICs observing.
  • The ICs implemented in the remaining countries with JustOne supporting each IC on their first implementation and providing remote support for the remaining countries.

Results

Between May 2013 and May 2015 the AR reductions were:

  • DSO reduced by 23%
  • BPDSO (an indication of payment terms) reduced by 15%

In addition to the cash released other benefits included:

  • An improved understanding of working capital and its importance to the company.
  • A much greater focus on overdues and its causes.
  • Improvement to the negotiation skills of sales people and a change of mind set regarding reducing terms with customers.
  • Consistent leading practice AR procedures and processes.
  • Improved monitoring of KPIs.