Optimization of working capital

Looking for a competitive edge companies and exploring alternative financing options for their working capital needs. The spectrum ranges from the supply chain financing through the securitization of receivables to factoring. This occupies a Demica study in collaboration with the Treasury Management International, were interviewed for the 78 Corporate Treasurer and Financial Manager.

As the main priorities for the coming year, respondents mentioned more effective or more effective cash management forecasts (63% of respondents), release of working capital (60%) and improving the risk management of working capital management (58%). 60% looked for the next five years a lot of potential for the release of bonded working capital in their respective industries.

In the economic environment after the financial crisis, it has become even more important to liberate bound liquidity, because the conditions for conventional bank loans are becoming sharper. Therefore, so said 80% of respondents are looking for the companies now increasingly looking for alternative financing methods.


Win cash from receivables

It focuses in particular on ways to attract additional liquidity from their receivables, as 87% of respondents confirmed Treasurer. 83% of study participants observed in their peer companies a growing interest in Supply Chain Finance (SCF), which allows longer payment terms for buyers at the same time early payments to suppliers - and all this at favorable financing conditions. A further 60% confirmed that companies find an increasing taste for the securitization of receivables (TRS) to make their receivables into cash.
The organizations surveyed had an unusually high rate of use of SCF - 40% offer their suppliers already such a financing facility. Liquidity Support in favor of the buyer company is the primary motive for the introduction of the program, followed by liquidity of suppliers and reduce supply chain risks.

At the same time the securitization of receivables (TRS) in the working capital strategy of the company is playing an increasingly important role. 16% of respondents currently have a TRS program. The decisive motive is also here the improvement in liquidity, while the favorable financing conditions and the diversification of funding options are the second and third place.

Among those participants who have not introduced TRS program, a quarter plans a corresponding implementation in the next twelve months. Due to the continuing trend towards diversification of business financing is also factoring, was once more as a stopgap measure, at companies of all sizes increasingly popular. More than 25% of respondents put Treasurer Factoring already an effective funding to increase liquidity, where the factoring volume of EUR 700,000 to EUR 800 million is enough.
Automation of financial processes

Matt Wreford, Chief Executive Officer of Demica, said: "The financial crisis has highlighted the importance of cash and liquidity in times of need. Has the optimization of working capital for the company to be a priority, even now, when the economic outlook is improving. Working capital solutions such as supply chain finance and securitization enable companies to automate the financial processes. Alongside increased transparency This means an increased operational efficiency, lower costs and in particular the production of cash for investments that the company long-term growth and prosperity bring working capital management represents an ideal alternative source of incremental cash flow. For companies that meet the requirements of an increasingly want to meet global supply chain with increased flexibility, diversification of funding sources by working capital solutions is therefore not an option but a necessity. "