November 16th 2020 – Better cash flow management
Since the beginning of the Covid-19 pandemic, working capital management has become more of a focus in many companies: this is confirmed by almost three quarters (72%) of the participants in a study conducted by INVERTO.
LONDON, November 16 – The Boston Consulting Group subsidiary specializing in procurement and supply chain management interviewed experts across European companies for the study. One third of the participants (33%) asked suppliers for extended payment terms because of the pandemic. Conversely, almost half of the suppliers (47%) asked for faster payment for the products delivered. They are likely to have found open ears with their customers, as 85% of the surveyed managers stated they would provide support to their suppliers in the event of a corona-related imbalance. 27% demanded no discount for their support, because the suppliers concerned were too crucial for their own business.
Regardless of the particular challenge posed by the pandemic, the study reveals opportunities for improvement in many areas: For example, only half of the companies (52%) have defined payment terms. The analysis of the working capital is also predominantly carried out by means of classic reporting. 55% set their own targets, while 15% use working capital benchmarking as a basis.
It is not surprising that a significant number of the experts surveyed are not particularly satisfied with working capital management in their own company. However, this reveals a clear difference between smaller and larger companies: While just under 70% of participants from companies with sales of less than one billion euros rate working capital management as “mediocre” or “poor”, 71% of respondents from larger companies rate it as “good” or “very good”.
Thibault Lecat, Managing Director of INVERTO UK, says: “As in many other areas, COVID acts as an eye opener revealing defects which call for improvement.“ He advises companies to firmly anchor the issue of working capital in the organization, for example, using a steering committee that monitors the development of working capital using targeted metrics. Payment terms and internal processes should also be precisely defined.
Study design The study on working capital involved 65 experts. About 70% of them come from the manufacturing industry. Half of the participating companies generate sales of more than 500 million euros per year. Interested parties can download a whitepaper with study results and recommendations for action free of charge here: https://www.inverto.com/en/publikationen/working-capital-survey-results-2020/
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