by Jon Richman, Head of Trade Finance and Financial Supply Chain Americas, Global Transaction Banking, Deutsche Bank
As the use of financial supply chain tools for optimising working capital has become increasingly prevalent over recent years, these techniques are now becoming more mature and the benefits more predictable. This article considers the factors that are contributing to the growing success of financial supply chain solutions and how they are likely to evolve in the future.
The strategic importance of working capital
Today, treasury performance is frequently measured using working capital metrics, and working capital objectives are now an essential element of corporate strategy. As a result, treasurers and finance managers are far more specific in their working capital objectives than in the past. For example, many treasurers are now seeking alternative forms of liquidity to diversify access to funding and mitigate liquidity risk, and increase the resilience and efficiency of their supply chains. These are in addition to, and often conducted in tandem with, more traditional payment and collection centralisation and automation initiatives, but the focus is now more on improving days payable outstanding (DPO) and days sales outstanding (DSO) metrics in addition to cash management efficiency.