We’ve worked on a number of Multinational Working Capital Management Projects over the last 15 years – one particular example of an accounts payable improvement for a leading global chemicals and coatings company is highlighted below.
Global Paper & Pulp Chemicals Company – Accounts Payable Improvement
Company – BU of a Leading Global Chemicals and Coatings Company
Project Description – Accounts Payable
Location – Europe
Working Capital Issues
- The DPO for the BU was 33 days.
- The Business Unit’s biggest cost is energy and terms with their energy suppliers were 30 days net or less.
- The buyers believed it was not possible to negotiate with energy suppliers.
JustOne Actions Undertaken
- JustOne facilitated a workshop with the buyers covering payables methodology.
- JustOne used Mental Model techniques to change the negative mind sets of the buyers.
- The workshop included negotiation training and role play.
- They buying team enhanced terms with many of their suppliers.
- They achieved success with energy suppliers increasing terms from 30 days net to 45 days end of month plus 4 days (averaging 64 days) an improvement of 34 days.
- The DPO rose from 33 days to 45 days a 36% improvement releasing €32m in cash.
The key to achieving the improvement in DPO was the change in the Mental Models of the buyers. Once they believed it was possible to enhance terms with the energy suppliers they used the negotiation skills they had learned to achieve excellent results.