Balance Sheet Review

Much has been written about the need to focus on cost optimization activities and work capital improvements since the contraction of the global markets in 2008 and early 2009. Despite this, new data shows that companies globally have allowed the difficulties in the market to negatively affect their working capital performance. As the global economy improves, many leading companies will use this time to fuel growth and will likely need additional capital. With revenue preservation and expense management having been placed under scrutiny in the last 12 to 18 months and external capital markets still in early recovery, capital will need to be pulled from other areas for those companies looking to generate internal capital. As financial and operations executives seek to refocus on working capital, performing a balance sheet review may uncover additional areas to finance growth as the global economy improves.

What is a balance sheet review

A balance sheet review is a broad, tactical effort to improve the visibility into the balance sheet assets and liabilities. Once inventoried, a strategic view can be taken to identify and implement cash generation and preservation opportunities. The balance sheet review team needs to have broad experiences in areas such as finance, treasure, supply chain, real estate, insurance and business process improvement. While the ultimate goal of the balance sheet review is to free up cash, it can be used as a check to gain visibility into how the corporate strategy is being executed. Executives and board committees may have asked similar questions:

Do we have a holistic view of all the office space we own versus lease? Is it being utilized effectively?

Is our nightly cash sweeping strategy being implemented in every line of business consistently?

How should liquidity be managed in our organization, locally or centrally?

We operate a supply warehouse. Do we even need this resource or should we push back on our suppliers to provide us an on-demand shipping solution?

Can we monetize our parking deck?

Am I getting the value out of the IT assets I purchased last year?

These questions, while encompassing many broad domains, speak to a lack visibility into balance sheet assets and liabilities. A balance sheet review will highlight the specific areas, be it treasury, cash management, inventory management, real estate or technology, where more detailed work is needed. The outcome of the balance sheet review, therefore, is a list of opportunities to be executed in the near-term and long-term.