Stockholm’s Berns Hotel was the venue for the first ever Working Capital Forum to be held in Scandinavia, which brought together corporate treasurers and procurement directors from 14 companies ranging from global technology firms to pulp and paper producers. The event, sponsored by Basware, was held under the Chatham House Rule, which allowed everyone present to speak freely about the working capital issues they were facing.
It didn’t take long for three common themes to emerge. First, two large companies which had recognised working capital as a key element of shareholder value were also those that had done the most work in embedding working capital targets throughout the organisation.
One head of working capital disclosed that incentive compensation for sales teams was now released when the invoice was paid, not when the order was booked, driving a remarkable change in the importance attached to cash collection throughout the business.Another said that reporting throughout the business now focussed on cash rather than solely on accounting measurements such as EBIT.

“One head of working capital disclosed that incentive compensation for sales teams was now released when the invoice was paid, not when the order was booked”

Often this change in internal reporting had originally been driven by a cash squeeze – sometimes going all the way back to the financial crisis – but, once the efficiency gains from the change became clear, it remained embedded in company culture even in low interest rate environments when cash was more readily available.

?Data matters
Less easy to solve, for most of those present, was accessing data. In a scenario common to many companies who have attended WFC meetings across the world, the first challenge for those new to working capital management was simply to find out what payment terms were being offered at the regional level.

“Cash had not been a priority,” said one working capital head who was starting the process at a global engineering firm. “Setting payment terms has been left to in-country subsidiaries to handle according to their local situation.”

Getting hold of  information at subsidiary level was the first step in creating a programme that monitored 137 indicators of working capital health each month, exposing the issue to senior executives in a way that pushed the issue much closer to the top of the boardroom agenda.

Every attendee agreed that collecting and managing this data was one of the main challenges they faced. Although everyone had access to an ERP system such as SAP, one of the most advanced companies in working capital terms – a global FMCG giant – was using pivot tables in Excel to capture and manage the data from a far-reaching working capital optimisation programme for want of anything better. Others confirmed that they too relied on Excel, with the risk that when those who created these often complex workbooks leave the business, they can rapidly become unusable.

Make-and-mend technology was only half the problem with data capture and analysis. Just as with sales teams, others needed incentives to return the required data to head office. “If it isn’t in the system, it didn’t happen” was one working capital leader’s approach, directly tying incentives  to the accurate and timely submission of data.

When asked about prevailing working capital conditions in Sweden, the group were clear that payment terms, for example, were broadly in line with other markets, varying between 30 days and, at the extreme, 120 days, and depending largely on whether a supplier was contracted or not.

As the meeting wrapped up and members left the cosy environment of the 19th century ‘Red Room’ at the Berns, it was clear that working capital is just as hot a topic in Sweden as it is elsewhere in the world, and that the information sharing and networking opportunity provided by the Working Capital Forum were already providing much-needed support for treasury and procurement teams.