Heinz Rotzoll - Introduction of a Net Working Capital Management approach

Project title	Optimization of net working capital performance
Company	International logistics group (private equity)
Industry	Contract Logistics, Freight Management, Private Equity Shareholders, eight companies and 60 sites in Central European Sub-Region (Germany, Austria, Switzerland)
Revenues	About EUR 380m in Central Europe (CE)
Number of employees	About 2.900 in CE
Own area of responsibility
Budget	Budget of finance area of about EUR 1.5m
Number of employees	Leadership: Management of about 30 employees, thereof 5 direct reports SSC (Shared Service Center) Finance (Onshore SSC) SSC transactional finance and accounting processes in India (Offshore Accounting Factory)
Background for the assignment	Implementation of a standard requirement for a large, internationally operating private equity portfolio company
Situation within the company	Post-merger integration phase, business combination of the contract logistics and air and sea freight divisions (worldwide) High liabilities from purchase price financing Requirement to comply with loan agreements (“covenants”) Need to place NWC management under central management and significantly improve it
Customer	Private equity shareholders
Autonomous role	Director Finance (authorized representative) Central Europe
Assignment	Implementation of a company-wide net working capital management approach with the following objectives: Increasing the efficiency of capital employed in current assets (net working capital, NWC) Ensuring compliance with contractual requirements (“covenants”) from sale and purchase agreements (SPA) for cash, EBITDA and net working capital (NWC) performance Improvement in cash flows from operating activities Reduction in interest charges from purchase price liabilities, improvement in financial result
Measures	Development and implementation of a company-wide NWC management approach Sensitization of the organization through educational and training measures Creating awareness and the necessary attention for the topic of NWC (“awareness”) Active accounts receivables management, e.g. improving the dunning process, shortening payment terms with customers, advance payments and payments on account Accounts payable management, e.g. optimization of strategic purchasing, concentration of the number of suppliers, extension of payment terms, optimization of payment runs, cash discount payments Measurement, ongoing monitoring, management of NWC
Achieved results/outcomes	Cash management Ensuring that sufficient cash and cash equivalents are available at all times Successful implementation of a cash pool organization in accordance with civil law regulations (compliance) Establishment of a central treasury function for the companies in Central Europe Provision of reliable cash planning and timely cash reporting which fulfil the managing directors’ duty of care Accounts receivables management Ensuring complete, correct and contractually compliant invoicing of the services provided by the companies in Central Europe on an accrual basis Increasing customer satisfaction by improving existing billing processes Significant and sustainable improvement of relevant key performance indicators (KPIs) Net Working Capital Management Sustainable, successful implementation of a company-wide NWC management approach Optimization of NWC performance: reduction of NWC from EUR 25 million to almost zero (“all time low”) within two and a half years Sustainably improved cash flows and financial results
Special feature of the project	The implementation of an NWC management approach is associated with a variety of difficulties On balance, improving your own NWC performance goes hand in hand with a corresponding deterioration in the performance of your business partners Efficient NWC management should therefore be implemented sustainably and with a sense of proportion Type of corporate financing becomes more important in times of more restrictive lending by banks

Special features with regards to the style of leadership:

I ensured close cooperation and the creation of a “we-feeling”.

Clarification that the implementation of an NWC management approach requires the willingness and ability to view business transactions not only in the usual P&L categories (expense/income)
Business transactions have also to be viewed from a cash perspective (cash flows; payments/receipts)
From the company’s point of view, this is therefore a “common problem” that can only be solved together
Knowledge transfer, provision of presentations and training on the subject of NWC management
Establishing and maintaining contacts with various contacts at Group and company level as well as with the SSCs at BPO service provider level
Implementing and leading regular NWC calls to discuss performance and initiate measures to improve KPIs

I held regular discussions and negotiations with business partners.

Conducted individual discussions with managers, employees and business partners
Convincing employees that optimizing this key figure is particularly important for the company’s financing
Convincing, conveying meaning, breaking down and overcoming sometimes considerable resistance from managers and employees
Leading business partners out of their respective comfort zones through “active” net working capital management
Objective and interest-oriented negotiation with business partners

I used “Job Design & Assignment Control” to ensure clarity.

Review of the organizational structure, updating of job descriptions and clear assignment of activities and responsibilities
Adaptation of the organizational structure in Finance by implementing new functions: Treasury Manager/Billing & Accounts Receivables Manager
Handover and promotion of personal responsibility, coaching and induction

I improved the framework conditions for success.

Creating awareness, raising attention and imparting knowledge and understanding on the subject of NWC (“Awareness”)
Training and ongoing coaching of employees
Providing clear definitions of key performance indicators (KPIs) and ensuring reliable ongoing measurement of KPIs
Provision and automation of reports in relation to KPIs
Supplementing the NWC calls with an escalation process to ensure that countermeasures are taken promptly by the responsible persons

I cultivated a constructive approach to stress and conflict.

Dealing with large companies (e.g. DAX companies) is sometimes difficult due to their economic strength and complexity
This applies in particular to the optimization of order and ordering processes (“order to cash”) and procurement processes (“procure to pay”)
Acting as a “mediator” to balance conflicting interests according to reasonable commercial principles
Ensuring relaxation/de-escalation in stress and conflict situations
Conducting appropriate and interest-oriented negotiations to find solutions to problems, e.g. coordinating payment agreements