The latest round-table meeting of the Working Capital Forum, supported by American Express saw eight senior treasurers gather online to discuss ways of getting ‘buy-in’ to working capital optimisation programmes.

While most efforts to shorten the cash conversion cycle and free up cash originate with treasury, many treasurers find that indifference or outright opposition in other areas of the business can be a block to success.

While several strategies for overcoming these obstacles were offered (see below), one of the most intriguing was from a treasurer in the retail sector where buyers were discouraged from building up excess inventory by being internally charged for holding stock over agreed levels. The charge was designed to reflect the cost of the capital tied up in excess inventory and was based on the Weighted Average Cost of Capital (WACC).

Virtual Lunch: Open to treasury, procurement and payments

Virtual Lunch: Open to treasury, procurement and payments

While not every effort to bring others ‘onside’ was so innovative, there was a wide range of solutions suggested around the table, all of which had delivered some success.

Most important of all was to get C-Level buy-in. The most successful working capital programmes were those that had the backing of a senior sponsor, usually the CFO. One treasurer admitted that lacking senior support, her programme had yet to gain the traction it needed to succeed.

All agreed that sharing regular data on cashflow was essential so that others became used to seeing cash as one of the things that were taken seriously in the business

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Four ways to make working capital a cross-organisation priority

  • Get C-level buy-in: A programme backed by the CFO has a much better chance of success
  • Incentivise other teams: Not every department shares treasury’s working capital objectives. Where possible, incentivise behaviour that helps to reduce the cash conversion cycle.
  • Share data: Regular reports on the cash position and ‘red alerts’ on potential bottlenecks help to focus attention on cash
  • Be present: One treasurer regularly attends meetings of the procurement team to take notes and ensure she understand their priorities

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One interesting side note to the working capital conversation concerned ‘right sizing’ treasury teams: One treasurer in a large technology firm wondered whether four treasury staff was enough, and a quick straw poll revealed teams ranging from just three in a major dinks company to 11 (including back-office staff) in one retailer.

Working Capital Forum Roundtables are open to corporate treasury, procurements and payment executives at larger corporations. They are held under the Chatham House Rule.

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In association with