FIVE WORKING CAPITAL MUST-HAVES TO WEATHER THE ECONOMIC STORMS: STOCKHOLM ROUND TABLE REPORT

As a small group of treasury and procurement leaders gathered in Stockholm’s Grand Hotel for the first ‘in person’ Working Capital Forum round-table for almost three years, UK Prime Minister Boris Johnson was also in town. He was there to pledge support to Sweden and, later Finland, as they prepared to apply for NATO membership - a reminder that conditions in Europe are anything but ‘business as usual’. 
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Our group included representatives from retail, telecoms, manufacturing, transport and media, and each had their own tales to tell of the impacts of war, rising interest rates, supply chain shocks and inflation on their businesses. Who knew, for example, that so many vehicle cables were manufactured in Ukraine?

What joined all these disparate industries together was the new emphasis on managing risk and providing shock-absorbers, not just within a business but across its supply chains, so that unexpected events can be overcome. One attendee suggested we should simply rename these shocks as ‘white swan’ rather than black swan events, as they are now becoming so common.

Supply Chain Finance

Perhaps best prepared were those who had already put in place supplier finance programmes to support extended supply chains. One participant in the telecoms sector described his own journey to bring together treasury and sourcing in a joint effort to launch an effective SCF programme and the bureaucratic hurdles that had to be overcome. 

“We were told some documents had to be signed by sourcing, others could only be signed by treasury, so we simply arranged for both of us to sign everything!’ The result was an SCF programme, created entirely in-house with multi-bank funding, that has grown to fund more than SEK 100bn of payables. (The full story on this DIY SCF programme will be told at Working Capital Forum Europe in Amsterdam on 1st December.)

Another participant in the retail sector also had a long-standing supplier finance programme in place, but was very aware that changing regulations could force a rethink. The Swedish government, along with many others, is looking again at its legislation around payment terms - which already go beyond the EU standard - and corporates here are waiting to see what emerges. Their hope is that the regulators avoid a ‘one size fits all’ approach and accept the difference between appropriate payment terms for SMEs and multinationals.

A clearer view with Business Intelligence

That, and the complexities of fresh EU regulations in food and agriculture, meant the need for a clear view of finances across the entire supply chain was greater than ever. Several participants were interested in developments in business intelligence (BI) and its abilities to distil complex information into dashboards and reports that could be shared across the organisation. For some, this was still a task stuck in spreadsheets but others had already begun the migration to specialist platforms, networks or ERP modules that could provide the ‘early warning system’ they needed.

Perhaps the most significant effect of rising inflation and interest rates is their impact on discretionary spending. When people are struggling to pay energy bills, monthly costs such as digital media subscriptions are often the first to be cut. For a media group at our meeting, this has prompted a fresh look at costs. For example, card processing fees, seen as a minor issue in the dash for rapid revenue growth, are now being reviewed - as are ways to make the high volume of small payments required to pay artists. 

Different concerns, then for different industries - but there were five themes that the group agreed are areas to look at for every business wanting to be ‘match fit’ for the trials that lie ahead:
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1. Systems and networks: Do you have a financial overview of your entire cash-to-cash cycle, from payables to receivables and, ideally, into your supply chain, both upstream and downstream? Can you produce clear, concise summaries of that data that are usable by senior leadership? If not, now’s the time to act.​

2. Partners: Are you getting the most from your partnerships in banking, technology, consultancy and elsewhere? Many service providers have resources and insight they will be happy to share.

3. Internal Relationships: Are treasury and procurement working together to address supply chain and working capital challenges? How about IT and legal? One participant is using the introduction of a new ERP as a catalyst to bring together disparate teams to create a more resilient organisation.

4. Communication: Talk to your suppliers, your customers, and your banks. A large supplier who has benefited from a serious conversation - in advance - may be much more flexible on payment terms. Creating a culture of communication in the good times can pay real dividends when things get tough.

5. Simplicity: The drive to simplify came up several times during the discussions - applied to systems, to processes and to relationships. Again, a technology implementation can provide the spur to simplification, and the simpler the process, the more robust it is likely to prove ​
​As lunch moved to a close, participants reflected on the benefits of experience: some of those present remembered the time when Swedish interest rates hit 500% - putting today’s rises, alarming though they are, into perspective!
​​Working Capital Forum round-table lunches are held under the Chatham House Rule, so while we may report what was said, we cannot reveal the identities or affiliations of the speakers. If you would like to attend a similar round table near you, contact dianah@adaugeomedia.com. Please note that attendance is restricted to treasury and procurement executives in larger corporations.