The first ever Working Capital Forum to be held in New York City saw a wide variety of organisations coming together to discuss working capital issues, from multinational corporations to a not-for-profit social housing group. As always the meeting was held under the Chatham House Rule, allowing everyone present to speak freely about their businesses in a discussion moderated by Adaugeo Media CEO Mike Hewitt and kindly sponsored by Basware.
Those who had already embarked on working capital improvements were able to share some of their insights into how to extend days payable out to 60 days and well beyond. In each case the starting point was to impose discipline on contracts - a global manufacturer had discovered no fewer than 295 separate payment terms across the organisation, but was able to simplify this greatly through a coordinated, company-wide program of rationalization.
One media owner moved from multiple payment terms to two: one, 30 days, offered to those suppliers on contracts and another, 90 days, to those which were not.
Many around the table pointed out that this rationalisation process is made easier when the right technology is in place to accurately monitor and manage the P2P cycle. David Reidy, financial services advisor at Basware, added that, in many cases, the spur to move to better working capital came from having automated the underlying processes and being able to visualise, for the first time, the benefits of working capital optimisation.
The next step in successfully extending payment terms was to educate everyone involved in the procure-to-pay process as to why working capital matters, and to align compensation to these new objectives; in all cases, the strong support of a senior executive was essential in ensuring that minds stayed focussed on working capital. In every case represented at the meeting, this process was initiated and led by the treasury and/or finance function, with the collaboration of procurement an essential ingredient for success.
Putting in place a supplier finance programme was, for some of those further down the pathway to optimised working capital, the logical next step in ensuring that suppliers were not put at financial risk by extended terms. While one major corporation had one of the world's oldest multi-bank supply chain finance (SCF) solutions already in place, only one other was now considering implementing dynamic discounting and most had yet to start implementing SCF - though all were interested in its possibilities.
As the discussions drew to a close, participants took advantage of the confidential nature of the meeting to exchange information on everything from cash flow forecasting systems to the use of payment cards as a working capital tool. By the time the first ever Working Capital Forum in the United States ended, plans were already being laid for the next one.