Financial executives have tried many ways to increase free cash flow and reduce working capital. DRS Sustainment Systems Inc. (SSI) in St. Louis, Mo., did it with a lot of help. The defense and aerospace contractor essentially enlisted its workforce in the effort by promoting a "culture of cash."
It was time for action. Between April 2007 and May 2008, SSI's working capital grew 41%, more than twice as fast as the 19% increase in its revenue. Free cash flow had fallen to just 78% of operating revenue, 13% below expectations.
SSI didn't really have a treasury problem or need a treasury-directed fix. As a division of DRS Technologies, now a subsidiary of Italy's Finmeccanica, its treasury was a remote corporate function, little involved in improving working capital at the SSI level. The unit had a pervasive business operations problem, and the solution lay in mobilizing the whole workforce to think and care more about cash, explains Shane Hegarty, director of engineering services and logistics.
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