Conferences are still vital, the COVID-19 pandemic has not removed the need for a fresh look and understanding of the problems, the opportunities and the solutions.  Working capital management is now even more important than ever. So, the timing of the ACT’s annual working capital management (virtual) conference yesterday was perfect to highlight the opportunities and issues. There were three sessions which reflected the current market environment.

Session 1: Beyond survival – optimising working capital

This session ably chaired by Brian Shanahan, CEO Informita, with two corporate treasurers - Anh Duong, Group Treasury Director, ERM; and Mattijn Bak, Director, Group Treasury, Vion Food - was a Q&A session on the key issues in working capital management today. The main lessons and tips to emerge from this were:

• In the pandemic:
  • Vetting of prospective customers has increased
  • The focus on payables and receivables has intensified because working capital management is still the cheapest form of finance     
  • A/P and A/R teams are now working much closer together       
  • Cash flow analytics are now needed much faster
  • Treasury interacting with sales much more frequently (probably a permanent change)
  • New emphasis on inventory management and KPIs
  • DSOs and PPOs are much improved and since the crisis
  • More briefing of stakeholders such as bankers and other parties
• In future, panellists expect:
  • Credit insurance concerns to grow as government support declines
  • Number of suppliers has not been reduced by COVID-19
  • Emphasis on cash flow forecasting will continue to grow with both top-down and bottom-up models both being used
  • Understanding and chasing/understanding the deviations from forecasts are getting increasing emphasis
  • Increasing emphasis on checking the robustness of suppliers and the probability of default
  • Cash-Conversion-Cycle and DSO metrics are becoming much more important
  • Liquidity squeeze is not expected, but panel not sure
• Key working capital management takeaways:
  • Having enough cash is vital
  • Need remittances in the right place
  • Cash flow forecasting is becoming more granular and corporate treasurers need to increase the frequency of their forecasts significantly
  • Treasury needs to understand inventory management practices and sales in the pipeline in much more detail.

(Other sessions focused on Credit Scoring and a review of SCF practices and technologies, see: https://crowdcomms.com/workingcap2021/modules/70451/html)

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CTMfile take: This session showed that the basics of working capital management don’t change, just the emphasis. Corporate treasury is now paying much more attention to the timeliness of understandings and the implications of what is happening in their company’s sales pipeline and inventory practices.