Cash & Liquidity Management
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Enhancing Working Capital for Growth and Competitive Advantage

by Kate Pohl, Region Head, Transaction Services Sales, Germany and Austria, ING, with Yesim Erdem Onat, Director, Working Capital Solutions, Germany and Austria, ING and Hans Sawatzki, Director, Transaction Services Sales, Germany, ING

While cash management has long been a priority for corporate treasurers, optimising working capital has emerged strongly as a key objective both in Germany and across Europe. With complex global supply chains and growing pressure on margins, unlocking working capital can be key to maintaining a competitive advantage and achieving growth.

According to PwC’s Global Working Capital Survey, 2014, Cash for Growth, improvements in working capital performance have slowed in recent years following initial success during the global financial crisis. Indeed, according to the study, absolute levels of working capital have continued to grow, resulting in the world’s largest multinationals having to find an additional €500bn simply to finance working capital rather than investing in growth. European companies are making the most substantial improvements, but performance continues to lag behind the rest of the world, with the predictable impact on competitiveness and hampering growth. To address this, treasurers and finance managers of German corporations are becoming proactive in identifying and delivering on opportunities to enhance working capital.

The business imperative

In Germany, working capital levels are typically higher than corporations headquartered in other parts of Europe as well as the United States, partly due to German corporation often being more conservative in their approach to cash and liquidity management. While financial conservatism remains an important characteristic, it can be costly. With cash often trapped in complex supply chains extending around the globe, economic uncertainty in China and Europe, and growing competition from both established and emerging players, cash tied up in working capital is preventing companies from paying down debt, expanding into new markets and investing in innovation.