Automation 'key to success' of working capital solutions

Ensuring your working capital solutions, including supply chain finance (SCF), are automated is “key” to their successful implementation, according to panellists speaking at the Working Capital Forum Europe in Amsterdam

Solutions need to be “user friendly” when attempting to incorporate working capital strategies set by the treasury department into the business, they told delegates on 1st December. 

“It is got to be automated and be visible,” said Anthony Buchanan, treasurer at Asahi Europe and International. Procurement needs to be able to use it with their suppliers, he added.

“The challenges our clients see is…the adoption of the solution the treasury put in place by the business. People are naturally going to adopt a solution that’s user friendly,” said Selena Moon, director, global strategy & execution, at American Express.

“We are seeing a shift towards virtual card models through API integration – that’s helping them monitor spend on high volume transactions. We are also seeing AR automation in some payment applications to streamline their order to cash process,” she added.  

Mila Harger, global head of digital treasury and banking at BAT, emphasised the importance of technology for day-to-day processes.

“If it is repetitive, it’s automated. For our solutions, no one touches anything on a portal. It is straight-through processing throughout. Otherwise, it is undermining a lot of investment the company has gone through to get to that end state,” she added.

But, Moon added, companies should avoid the practical implementation of a new programme eating into the balance sheet benefits it might bring.

“From solution perspective, a new initiative cannot add to manual effort. People costs ultimately ends up supplementing the cost of working capital,” she explained.

Harger also warns delegates to consider the technological capabilities of your suppliers or customers to minimise how much investment they need to make in people or new technology.

“Your customers may not be at the same level of straight-through processing as you are and so the adoption is important. Any additional overhead the vendors may have made will just come back to you as cost.”

Close collaboration with procurement teams was highlighted as a vital part of setting up working capital optimisation projects.

“A common scenario we see is that treasury and procurement have different KPIs. When implementing solutions, procurement is brought in too late. All departments including accounts payable, tech and procurement working together is critical,” said Moon.

Buchanan added: “If procurement doesn’t buy in – it is never going to work.”

The panellists also spoke of a shift in mindset in how working capital management is viewed within a company – particularly given today’s more challenging economic conditions, with rising interest rates and high inflation.

“When there is plenty of sources of cheap capital from debt capital markets and private placements – there is less incentive to understand your working capital position," said Alistair Baxter, head of receivables finance at Taulia.

“Working capital is now becoming its own discipline – being recognised not just at a treasury level but at a CFO level as a strategic capital to optimise return on capital. C-suite now realise this is a way to achieve goals and not just to smooth out lumps and bumps,” he explained. 

While the economic climate has heightened awareness for improved working capital management, there is a risk that suppliers will question their involvement in supply chain finance programmes.
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Buchanan explained how Asahi rolled out its SCF programme to 2010 when financing was much cheaper.

“Now interest rates are going up and suppliers are coming back to us and wanting a discussion.
But look our credit spreads have not moved. Libor is up, costs are going up, but it gets reflected in their sales price. But the overall spread for supply chain financing has not changed,” Buchanan said, noting there needs to be more education around the different benefits of SCF.