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Like Team Sky’s power data, working capital performance is a competitive advantage

WHEN Chris Froome tackles the imposing 2,097 Col de la Croix de Fer in the denouement of this year’s Tour de France it is unlikely he will consider the similarities between his and Team Sky’s attempts to address doping allegations and working capital data at Europe’s biggest companies.

Nevertheless, following Team Sky’s decision to release swathes of performance data behind Froome’s [Yes, I know that’s Sir Bradley Wiggins in the picture] performance at La Pierre-Saint-Martin – the climb which has caused such controversy – it struck me that very few corporates would be willing to share such commercially sensitive data with their competitors.

Like working capital, Froome’s so-called power data lies at the very heart of the team and/or corporate performance.

Financial Director is soon to publish our annual analysis of the working capital performance at Europe’s largest listed businesses – based on information provided by REL. And, like Team Sky’s power data which is unintelligible to all but sports scientists, the working capital data, which includes statistics on sales, inventory, collections and overall cash conversion, is equally unintelligible to anyone outside of the finance profession.

To be blunt, it can also appear pretty dull.

Chief financial officers often want to talk strategy and vision. They wax lyrical about corporate social responsibility. On the topic of working capital they prove much less loquacious. Out of ten FTSE 350 companies contacted – all of which were among the top performers in Europe – only one was willing to speak. 

Why is this? Well, how corporates manage the process between cash coming in one end of the business and it funnelling out the other is as commercially sensitive and closely guarded as Team Sky’s performance data.

Working capital will never hit the headlines in the same way as a big acquisition, rights issue or accounting scandal. Yet it remains the most fundamental responsibility of an FD and represents the very lifeblood of any business – it was a lack of liquidity and not a lack of profit that brought US insurance giant AIG to its knees.

That is why very few companies are willing to discuss it.

Richard Crump is deputy editor of Financial Director & Accountancy Age

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