Procurement

Corporate Treasury: Funding Working Capital

Report date: 
14 Nov 2024

Commentary

In this second call in our working capital series, we discussed supply chain financing and factoring programmes, and people’s experience with them. These differed significantly.

One of the main takeaways is that, for some companies, managing working capital is a key strategic goal (in our survey of September 2024, 44.6 % said their company has a formal working capital policy): this is reflected in the measurements and tools, which vary to reflect regional differences. Some use working capital financing if it is a cheaper source of funding: they often find it is not - though some find it is. Many participants are interested, but prioritise operational issues, such as improving supplier payment terms or late collections.

Our survey showed a higher level of adoption of receivables financing (factoring, securitisation) at 48%, versus 36% for supplier financing. For future intentions, both solutions were 39% and 41% respectively. The call gave a lot more colour.

Factoring: 

  • One participant had implemented a factoring programme. They initially had a poor experience with a fintech, and so moved to a bank solution, the bank offered the same price without a credit wrap. The company views participation in the programme as a way of managing wallet share, and so carefully controls distribution. This works, but it limits the programme size.
  • Few others on the call were actively factoring or selling their receivables. Some had discontinued existing receivables programmes, due to cost. This generated a lively discussion: some found the cost attractive, especially if you include other considerations, such as risk mitigation.
  • Factors need a lot of
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Topics covered in this report: 
Bank Relationships, Factoring, Supply Chain Finance, Procurement, Credit Risk, Wallet Share, Virtual cards, Funding
Service providers discussed in this report: 
IFC, Barclays, Deutsche Bank

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The Impact of the Supply Chain Crisis on Working Capital

Report date: 
26 Sep 2022

Commentary

Working capital is always a hot topic – but never more so than now. Depending on how you count, most businesses are facing double, triple or more whammies:

  • Difficulty obtaining supplies, resulting in lost sales, or seasonal goods arriving too late for the season (one participant is in the apparel industry, where this is crucial).
  • Manufacturing inventories building up, as products cannot be completed or sold due to one or two missing components – but the rest have been bought and paid for.
  • Supply chain management building extra inventory buffers
  • Difficulty managing FX hedging programmes, as future cash flows become even harder to predict and forecast
  • And, of course, this is all happening against an environment of rising interest rates, which increases the cost of holding inventory
  • Margin pressures, due to increased shipping costs – especially given the increased use of emergency shipments, which come outside the agreed rates
  • Coupled with inflation and recession risks, there is an increasing concern over distributors’ being left with unsold inventory, with an accompanying credit risk

As always, we had a lively discussion – I encourage you to....please Log In to continue

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Topics covered in this report: 
Supply Chain Finance, Supply chain, Working Capital, Inventory, Procurement
Service providers discussed in this report: 
C2FO, Prime Revenue, Nexus

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