A strong WCM strategy depends on promoting a cash culture that is fully understood by all parties, including suppliers, writes Brian Shanahan
Good WCM is not just about dressing up your balance sheet and sticking it to the supply base. Good WCM is about maximising the opportunities for investment and cooperation across the supply chain, not for just one company in the chain.
It is very likely that a company that is good at working capital management (WCM) will have effective internal processes. This is usually the case because to be good at WCM requires effective processes.
For example, in order to collect cash from a customer, we need a clear customer order, a clean invoice, a good collections process, an efficient dispute process for when things go wrong and a good cash-allocations process for when the cash is collected. Fail on one of these points and it is very likely that you will not be collecting invoices on time and the cost of process will escalate substantially.
Companies around the world are putting some suppliers onto ‘immediate’ payment terms because they don’t trust their own accounts payable processes.
Companies around the world are putting some suppliers onto ‘immediate’ payment terms because they don’t trust their own accounts payable processes, according to new research from Informita, a working capital analytics and consultancy firm.
This is skewing the ‘headline’ overall average payment terms data. The average payment terms in south Asia is calculated at just 18 days, contrary to popular belief, the research has found. But that figure appears to be heavily skewed by the 59% of suppliers in the region that have been put on ‘immediate’ terms by their customers.
Please click here to get a copy of the presentation that was shared at the ACT Working Capital Conference. The key message was that good working capital management is a key competitive advantage for your organisation.
How will working capital management be impacted by this new technology.
Most of us have heard of Bitcoin in the news as a new internet based virtual currency that is getting more popular all the time. Most of us have no direct experience of this new currency. Then some more of us have heard the term Blockchain. Most most of the explanations are full of technical jargon that most do not understand but apparently this concept is set to change the nature of supply chain management in the coming years.
Brian Shanahan details the pitfalls of working capital benchmark using public information. There are a number of working capital benchmarks published by many organisations across the world and all of them lead with headlines such as “$1 trillion lost in working capital”. While these headlines might please the marketing people, increasingly the finance community is more and more sceptical of these surveys and there are a number of very good statistical reasons why they are absolutely right to be doubtful.
Procurement will wind up sacrificing suppliers like chess pawns if it relies on relentless price cutting. SCF offers a more strategic approach.Procurement will wind up sacrificing suppliers like chess pawns if it relies on relentless price cutting. Brian Shanahan explains why SCF offers a more strategic approach.
In the first of a regular comment series, consultant Brian Shanahan considers the impact of Brexit on supply chain finance programmes funded by British banks.