Off the Shelf: The 2004 Working Capital Survey

*Note: Many companies use cost of goods sold instead of net sales when calculating DPO and DIO.

REL Consultancy Group, which conducts CFO's survey, uses net sales across each working capital component to allow a balanced comparison across each DWC element and provide true comparisons between industries. Reported sales have been adjusted for acquisitions and disposals during the year.

To ask questions about REL Consultancy Group's methodology, or to benchmark your own company using the REL methodology, visit www.relconsult.com.

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Transatlantic Tie

After years of lagging behind, European companies finally equal their American counterparts when it comes to working capital.

The end of the financial bubble in Europe was evident in last year's survey, when a squeeze on balance sheets caused a remarkable 83 percent of European industry sectors to report net declines in working capital. "Europe had a lot of fat, and it was easy to get rid of," says Marc Loneux, REL Consultancy Group's chief financial analyst. Although traditionally better at managing working capital, U.S. companies were already well into a downturn, and couldn't match Europe's burst of performance. Just 59 percent of U.S. sectors reported DWC reductions in last year's survey, and average DWC was reduced by less than one-third of the average European reduction.

The 2004 survey once again shows DWC declining in 59 percent of U.S. sectors. This time, however, European performance is on par — 60 percent of sectors reduced DWC. Moreover, the United States and Europe show similar levels of improvement in receivables, inventory, and overall working capital performance. "Clearly, on both sides of the Atlantic there is now a common awareness of working capital best practices," says Loneux. "It's part of globalization."

Ironically, globalization may also account for a slight deterioration in results for Dell, long the leader in working capital management. The company saw DSO rise 20 percent, to 32 days. "As we continue our growth outside the U.S., certain countries aren't as robust" when it comes to payment and other practices that affect working capital, notes chief accounting officer Robert W. Davis. —T.R.

COMPANY	DSO		DIO		DPO		DWC
	2003	Change '03 - '02	2003	Change '03 - '02	2003	Change '03 - '02	2003	Change '03 - '02
United States
Total	52.1	-2.6%	31.2	-2.5%	29.6	-0.3%	53.7	-3.9%
Total Excluding Auto Mfring.	41.6	-3.0%	31.5	-3.1%	28.6	-1.7%	44.5	-3.9%
Europe
Total	59.9	-0.5%	35.0	-2.8%	41.8	1.0%	53.1	-3.1%
Total Excluding Auto Mfring.	51.1	-1.9%	34.1	-3.4%	41.4	0.7%	43.7	-5.8%

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