Factoring as a WCM solution is on the rise throughout Europe. However, as the following image shows, factoring leads a shadowy existence in Switzerland compared with the rest of the world.
WCM market perspectiveUseful information about the international and national WCM market
Obtain key insights into the international and national working capital management market.
Factoring market: a comparison of Switzerland and Europe
This is also evident 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.
Sales volumes from the factoring sector in Switzerland
Sales volumes from the factoring sector in Germany
Low interest rates and the strong equity base of many companies in Switzerland explain this reticence towards factoring. There is also a fear that factoring will entail significant additional bureaucracy, or that factoring providers – depending on how they are structured – will go after their own customers. The rather negative image of factoring in Switzerland may also stem from this. The following arguments counter such reservations:
- Factoring provides the opportunity to further reduce finance charges, even in a low interest rate environment, while improving balance sheet figures at the same time.
- The use of modern tools means that there is virtually no additional administrative workload.
- Payment collection can still be carried out by your company.
- With silent factoring, customers are not informed about factoring.
- Almost all large companies use Supply Chain Finance instruments, and their deployment is also beneficial for SMEs in many cases.
The Working Capital Management Study conducted annually by the University of St. Gallen presents a comprehensive overview of WCM in Swiss companies. Here are the key facts and figures from the latest study:
Focus on WCM
The Working Capital Management Study 2017 indicates that Swiss companies are optimistic about the future and anticipate a significant increase in revenues and profit. However, this should be achieved without an increase in working capital as far as possible. Attention is therefore being focused on WCM.
Ongoing low finance charges
The costs of a medium-term loan remain very low. 6% of companies even receive negative interest rates. The proportion of bank loans in the financing structure has nevertheless fallen in recent years. Companies want to remain as independent as possible.
Constant capital tie-up time
Der durchschnittliche Cash-to-cash Cycle für die Schweiz bleibt im Vergleich zum Vorjahr konstant bei 87 Tagen.
WCM impact on earnings
Participants emphasise the positive impact of WCM on key corporate objectives. This positive impact is not restricted to liquidity but also extends to profitability and process efficiency.
Download the latest WCM Study here free of charge:
What is the current position of Swiss companies regarding digitization in WCM? The Working Capital Management Study 2017 provides three key findings.
1. High expectations, low degree of implementation
Swiss companies have very high expectations in all sub-categories of WCM as far as digitization is concerned. They want to see full or partial automation of processes in the areas of accounts receivable, accounts payable, inventories and liquidity. However, the degree of implementation of digital methods generally remains low. Highly progressive approaches are still rarely used.
2. Major differences in investment volume
There are clear differences amongst the participating companies in terms of investment volume. While the top fifth of these companies invest 1.8% of their revenues in WCM digitization projects, the figure stands at just 0.1% for the remaining 80%. Most companies appear to be initially watching and waiting in view of the wide range of approaches.
3. Focus on process efficiency, but not exclusively
The study also looked at where investments are being made in digitization in the individual categories of WCM. In accounts receivable, for example, 41% of investments are accounted for by order processing alone, a further 22% by e-billing and 19% by e-payment. In the category of accounts payable, software-based accounts payable management systems made up the highest proportion at 30%, followed by the implementation of e-billing systems at 26% and e-payment solutions at 24%. In summary, it is evident that the emphasis is being placed on process efficiency in all categories. However, more progressive digitization approaches are also increasingly being pursued in the top 20% companies. For example, big data analytics or smart contracts based on blockchain technology in the area of accounts receivable, and cash pooling in the category of liquidity, are of major importance for large companies in particular.
Download the latest WCM Study here free of charge.