**London**: Finance leaders are adopting innovative financial strategies and benchmarking tools to enhance working capital management and improve supplier relationships. A new collaboration between PYMNTS and Visa reveals significant benefits for firms embracing advanced solutions amidst economic uncertainties like tariffs and trade wars.
Finance leaders, particularly Chief Financial Officers (CFOs), are increasingly turning to advanced financial tools as they navigate a turbulent economic landscape marked by uncertainties, including tariffs and trade wars. Traditional methods, such as spreadsheets, which once served as essential instruments for managing finances, are becoming insufficient for the complexities of modern business environments.
The focus on maintaining working capital, which is crucial for meeting short-term obligations and ensuring operational continuity, is gaining prominence among CFOs. Working capital efficiency—a measure calculated by subtracting current liabilities from current assets—offers insights into a firm’s liquidity. However, relying solely on this static figure can obscure opportunities for improvement. To enhance working capital management, finance leaders are exploring a variety of tools, including payment discounts, automation of accounts receivable and payables, and the utilisation of virtual cards to optimise cash conversion cycles.
Benchmarking against top performers within their industries is becoming a strategic priority for middle-market firms, defined as those with revenues ranging from $50 million to $1 billion. A recent collaboration between PYMNTS and Visa has resulted in the launch of a benchmarking calculator, leveraging insights from the “Growth Corporates Working Capital Index.” This index, which incorporated feedback from approximately 1,300 CFOs and treasurers across eight global industries, highlights key areas for potential improvement in working capital management.
Notably, the findings indicate that 72% of surveyed companies reported enhancements in buyer/supplier relationships due to the adoption of external solutions, such as virtual cards. In fact, firms identified as growth corporates benefitted from a 25% decrease in unpredictable financing needs and an increase of 21% in early invoice payments compared to the previous year.
The benchmarking tool allows CFOs to generate personalised reports, helping them gauge their firms’ positions against industry standards. For instance, CFOs in the manufacturing and construction sectors, which currently face volatility due to tariffs, can evaluate their working capital needs and supplier connections. Preliminary data suggests that a significant 46% of suppliers are now integrated into buyers’ payment systems, while 22% of financing needs exhibit unpredictable variations. Furthermore, over half of the firms employ working capital solutions for strategic growth, based on projections for 2024.
Regarding operational metrics, the engagement with working capital solutions appears prevalent, with 97% of firms utilising at least one such tool. Among these, two-thirds reported an improvement in buyer/supplier relationships. Notably, 25% of those using external working capital mechanisms also accessed bank credit, alongside other forms of working capital loans.
Overall, the data reflects how industry leaders are adapting to dynamic economic circumstances by employing innovative financial strategies. By focusing on benchmarking against high-performing counterparts and utilising advanced financial tools, businesses can better navigate the complexities of the current market, ultimately paving the way for sustained success.
Source: Noah Wire Services
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