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How to maximise your working capital % rate returns

In the age of negative interest rates from banks and low rates from money market funds, there are still really good rates to be had working capital management if you have the systems and processes to manage your working capital flows.

1. Take max supplier discounts

Strategic Treasurer recent important report Major Market Conditions Impacting  Supply Chain Finance contained this chart:

Source & Copyright©2018 - Strategic Treasurer

Which shows how much better the returns are from taking most supplier discount offers. They are way better than even paying down debt.

2. Only offer discounts to your customers when economic

C2FO is the working capital exchange that allows companies to optimize their working capital positions in a live marketplace which allows users to take the opportunity for early payment when it makes economic sense. This is key, don’t offer discounts to everyone or all the time, only when you need early payment and be able to select the supplier who will pay you most.

3. Charge more for paying really early?

Supply chain finance systems and offerings are developing all the time. The new business model that Previse have developed: paying cash-on-delivery is revolutionary. It uses AI understanding of the risk profile of each supplier to enable buyers to be able, if they want for all their suppliers, to safely pay them the day they issue their invoice, or from receipt of purchase order, at a very attractive financing rate, see below:  

Source & Copyright©2018 - Previse

Now many of these suppliers would offer increased discounts for early payment, particularly if it was for ‘cash-on-delivery’. 

CTMfile take: Supplier discounts of any kind - there are many different kinds - offer much greater returns than almost any other investment open to corporate treasurers today. But the unresolved issues are: 1. Why don’t more corporate treasury departments make use of this opportunity, and 2. Why shouldn’t every supplier be paid cash on delivery or within a few days?

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