Supply Chain Finance Inertia Costing Corporates Billions; CFOs to Grow Company Value

The vast majority of treasury teams view boosting working capital as a high priority for their organization, but many spend less than 10 percent of their time improving it.

This is one of a number of findings from research conducted by Kyriba, the leader in cloud-based treasury management solutions, and Aite Group, an independent research and advisory firm focused on business, technology, and regulatory issues.

Over three-quarters of all respondents (76 percent) cited extending account payables as an important feature of working capital improvement, while an even higher number (86 percent) viewed reducing account receivables as important. However, 39 percent of organizations spend less than 10 percent of their time optimizing their working capital.

The research revealed that, although almost two-thirds (63 percent) of organizations have an interest in integrating reverse factoring into the cash forecasting and payment systems, currently only 14 percent have already implemented a reverse factoring supply chain finance program.

The survey also highlighted discrepancies in how organizations’ procurement departments interact with their suppliers. While a full 70 percent of respondents’ suppliers request early payments, only 47 percent of corporate procurement departments are asking for additional discounts for prompt payment.

“This research shows that, although most organizations see the benefits of using supply chain finance (SCF) tools to improve their working capital, it is still an area that treasury teams have not yet fully embraced,” said Enrico Camerinelli, senior research analyst at Aite Group. “Much of this lack of growth can be attributed to inertia among corporates, who need to understand the benefits of supply chain finance solutions better.

As more sophisticated tools to support supply chain finance programs become more widely adopted, we will start to see a significant increase in the amount of early payment transactions taking place.

Aite Group analyst Enrico Camerinelli has developed a white paper, Treasury Management Systems and Supply Chain Finance, which outlines the processes and tools that corporations can use to improve their supply chain finance operations.

Note: Kyriba and Aite Group will be holding a joint webinar to discuss the results of the survey in more detail and address the future of supply chain finance. The free webinar will be held on Thursday July 11, 2012 at 2 p.m. EDT. Attendees can register on Kyriba’s website, and will earn 1.2 CTP/CCM credits for their participation.