Working capital specialist firm REL recently released the results of its 16th annual European Working Capital Survey, and according to the findings, more businesses are integrating supply chain financing (SCF) into their operations. The result is creating a “positive effect on the overall health of supply chains,” according to REL director Jonas Schoefer.
However, the REL survey showed that if all companies were to optimize their working capital operations – in respect to payables, receivables and inventories – the money that could be released would be nearly €900 billion.
According to the survey, the best companies have a well-optimized process, and in effect are able to pay suppliers two-and-a-half weeks later while also operating with nearly 70 percent less inventory. However, sustaining working capital improvements is still a huge challenge for these firms, the research said.
“Only 14 percent of companies in the REL study improved days working capital (the days it will take a company to convert its working capital into revenue) for three consecutive years,” the report said, according to Supply Management.
Schoefer added that companies are paying suppliers later because more firms are using SCF.
“This would extend payables on the balance sheet, but actually mean that suppliers can access payments earlier. This would also explain why we can see a like-for-like trend in receivables – companies receive payments earlier on the whole.”