Key to capital

Although the much-invoked credit squeeze has not come about, especially small and medium-sized companies still need assistance in getting outside capital. Alternative ways of financing are more in demand than ever before. Particularly start-ups currently have bad hands. Even with investors.


Optimizing the value added chain

"Instead of borrowing money, it's much more advantageous to examine the internal financing power of my business" – that's the advice given to companies by Gerd Kerkhoff who is the Managing Director of Kerkhoff Consulting, a consultancy specializing in purchasing and procurement optimization. He recommends to business managers that they optimize their entire value-added chain from purchasing – and thus their incoming goods department – via production, and all the way to the sale of goods. "During the crisis, many companies suffered huge losses in sales and now they don't want to go further into debt by raising outside capital. And that's where a reduction of current assets is close at hand." Every cent by which companies can reduce their working capital would be available for renewed investments. To this end, the entire value-added chain is to be optimized: "In purchasing, it's first of all important to change payment conditions such that goods received need be paid as late as possible", advises Kerkhoff. "At the same time, it must be examined which supply concepts are sensible to reduce inventory levels."

For example, inventory control can be put into the supplier's hands by providing tie-ins into a company's IT system. Or deliveries will be completely changed over to the just in time concept. Once the goods are at the company, production must proceed swiftly to keep inventories low. When reducing throughput times in production, setting up times for machines need to be minimized, runs or routes must be optimized and lot sizes reduced. Finally, it's important to convince any buyers of products to pay for their goods as early as possible and accept them very fast. Factoring would also be a possibility to bring cash into the company as early as possible.