Working Capital Optimisation Still Key, says Report

As the global economy picks up, working capital optimisation will continue to be a high priority in 2015, a survey of 78 corporate treasurers and financial managers by Demica finds.

The report notes that treasurers are increasingly looking beyond the traditional forms of finance to explore a wider range of alternative funding options that support their working capital requirements, ranging from supply chain finance (SCF), to trade receivables securitisation (TRS), to factoring.

The research, produced in conjunction with Treasury Management International, reveals that more effective cash management/forecasting (63% of respondents), releasing working capital (60%) and improving working capital risk management (58%) are the three most important priorities for surveyed treasurers in the coming year.

Demica said the survey’s sample represented a strong enthusiasm for SCF, with 40% of respondents already offering such a finance facility to their suppliers. Enhancing working capital liquidity for the buyer company is the most important driver for the implementation of the programme, followed by the provision of liquidity to suppliers and reducing supply chain risks.

The research also found that TRS is becoming an increasingly important component in corporates’ working capital strategy, with 16% of respondents running a TRS programme. The decisive driver for doing so is, first and foremost, to improve liquidity.

Among those that have not implemented a TRS programme, one on four plan to do so in the next 12 months.

“The financial crisis has highlighted the importance of cash and liquidity in times of need,” said Demica chief executive (CEO) Phillip Kerle. “Working capital optimisation will therefore remain a priority for companies, even as the global economic prospect gradually brightens.

“Underpinned by innovative technology, working capital solutions such as SCF and TRS help companies automate financial processes, thereby improving visibility, enhancing operational efficiency, reducing costs and most importantly, freeing cash for investments that support a business’ long-term growth and prosperity.”


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