Increasing working capital is crucial for boosting EBITDA and maximizing returns in your portfolio company. Often, analyzing daily operations from a financial perspective can reveal hidden opportunities for cost optimization, margin improvement and profit growth. For many CFOs, freeing up cash on the balance sheet requires increasing financial oversight of day-to-day operations.
Whether achieved through reducing inventory, improving turnaround times for goods and services, or optimizing raw material orders, the key to identifying these opportunities lies in data transparency. Leverage your company’s data to spot areas for improvement and drive more efficient decision-making across all operational areas of your portfolio company.
Read more: Unleashing Profit Potential Within Data
Step 1. Build Your Data Foundation
Upon beginning a new role at a portfolio company, assess the strength of your data analytics department. If a data analytics role does not exist, establish one to gather and analyze detailed information on company operations. Then, collaborate to identify the most important metrics for your business. Focus first on areas where it’s simplest to make improvements that will yield the highest financial returns.
For instance, if inventory management is a key area for improvement, begin by analyzing market demand to guide your approach. Determine which of your products sell best and fastest to focus on optimizing production of these items. Meanwhile, reduce inefficiencie...