Three top reasons

That’s why now is the right time to optimize your working capital

The WCM experts at PostFinance explain why now is the right time to introduce measures in your company to ensure efficient working capital management.

First reason: turnaround in interest rates: prepare your company in good time

As a turnaround in interest rates seems more and more likely, it is time to follow a new path which will have a major impact on your company’s working capital. While some companies have mainly concentrated on releasing as little liquidity as possible in recent years in order to avoid negative interest rates, from now on companies need to prepare for a reduction in working capital. This is because working capital management projects take at least six to twelve months to deliver results. For an overview of potential solutions, see WCM solutions.

Second reason: digitization is progressing: take advantage of this opportunity for your working capital management

From e-bills to smart contracts based on blockchain technology, from track-and-trace systems to demand planning with big data analytics, from e-payment to e-procurement and software-aided liquidity management or cash pooling: in areas relevant to WCM, i.e. accounts receivable, inventories, accounts payable and liquidity, there are more and more possibilities for digitization – and for reducing manual activities and achieving significant efficiency gains. As shown by the Working Capital Management Study 2017 conducted by the Swiss Post Supply Chain Finance Lab at the University of St. Gallen, Swiss companies have correspondingly high expectations of the digitization of WCM. They are hoping for an automation of processes. At the same time, the implementation rate of digital approaches remains low overall. Although the top 20 percent invest 1.8 percent of their revenue in WCM digitization projects, the figure is just 0.1 percent for the remaining 80 percent. Close this gap and prepare your company’s WCM for the future by adopting digital approaches. It can make sense to start off with small measures based on your WCM strategy.

Third reason: don’t be dependent on supply chain finance

Supply chain finance instruments are on the rise in Europe. They rely on cash flows along the supply chain, and aim to optimize payment deadlines and control liquidity in a targeted manner. The instruments used include factoring, reverse factoring and dynamic discounting, for example. If we look at factoring in more detail, for instance, we can see that factoring is increasingly common in Europe, while it remains in the shadows in Switzerland.

Factoring market: a comparison of Switzerland and Europe

Graphic showing the factoring market in Europe and Switzerland

This is particularly clear in comparison with Germany: in relation to gross domestic product, the use of factoring in Switzerland in 2015 was 50 times lower than in its neighbouring country You should not allow yourself to become dependent on it, but should also make use of SCF instruments such as factoring, reverse factoring or dynamic discounting. You can find out how they work at WCM in practice.

This might interest you too