A recent study by consulting firm REL, “The Earnings Game: Is gaming the system to meet working capital targets really worth it at year-end?” examines the pressure many companies face to meet analysts’ earnings expectations each quarter, as well as the gamesmanship in which some firms engage in order to make their numbers.

REL’s analysis of nearly 1,000 publicly traded, non-financial companies reveals that the firms reduced their net working capital between the third and fourth quarters of 2011 by $24 billion, only to have it more than rebound in the first quarter of 2012, when it rose by $42 billion.

Similarly, nearly half the companies that engaged in these activities decreased their days working capital between the third and fourth quarters of last year, only to let it balloon in the first quarter of 2012. Among these firms, net working capital dropped by $52 billion between the third and fourth quarters of 2011, before jumping by $53 billion in the first quarter of 2012.

The numbers “suggests that companies are gaming the system to improve their short-term position and that these improvements are not sustainable,” the researchers write. For example, some companies rely on quarter-end discounts to entice customers to buy in bulk, giving sales a last-minute boost. Others use extended payment terms to accomplish the same objective.

To be sure, these tactics often pump up the top line, at least for a while. However, they introduce other problems, the report notes. Flooding an operation with orders can strain its production capacity. In addition, customers learn to wait for the discount. And, extending payment terms obviously slows down cash flow.

Another tactic that can provide a temporary boost to a company’s cash balances is to take a more aggressive approach with collections. The report points out the downsides: for starters, some customers are turned off. Moreover, the actions can convey a message of panic, leading clients to wonder if the company is foundering – and if they should begin looking for a new supplier.

Some firms engage in gamesmanship with their suppliers by, for example, delaying payments or refusing to take delivery of products that had been ordered until after the start of the upcoming quarter. These tactics can make a firm’s numbers look better in the short-term, but create problems down the road, as the report points out. Suppliers quickly wise up, and are more likely to tighten their terms when it comes time to renegotiate. Delaying the receipt of supplies can strain the relationship with the supplier, and, of course, disrupt the manufacturing schedule.

REL offers several recommendations for halting these practices. For starters, the executive team needs to make it clear that the company won’t engage in tactics that boost short-term results but also hinder the company’s ability to work toward its long-term goals. Getting there typically will require taking into account the firm’s working capital management objectives as compensation structures are developed, and taking sustainable steps to improve working capital on an ongoing basis.

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