Visa released the latest edition of its Growth Corporates Working Capital Index, highlighting the evolving role of working capital in the strategic growth of mid-sized companies. The study, capturing insights from 1,297 CFOs and treasurers across 23 countries, suggests that working capital management has transcended traditional liquidity functions to become a vital component in business expansion strategies. This shift reflects the increasing complexity in managing financial resources and the necessity for companies to be agile in their approach to capital allocation.
In previous reports, working capital was primarily viewed as a tool for managing day-to-day operations. However, the latest findings underscore its expanded role in enhancing supply chain efficiency and supporting corporate growth. Compared to earlier editions, there is a notable increase in the strategic deployment of working capital, with 37% of executives reporting heightened investment in growth initiatives due to better capital access.
How Do Top Performers Utilize Working Capital?
Top-performing companies are optimizing their working capital by integrating suppliers into enterprise resource planning systems, thereby streamlining payments and enhancing cash flow visibility. This integration has led to substantial savings and stronger supplier relationships. For instance, these companies have saved $11 million this year by reducing interest costs and capitalizing on supplier discounts, a significant leap from the previous year’s savings.
Will Digitization Impact Working Capital Management?
Yes, digitization is having a profound impact on working capital management, as businesses increasingly adopt digital-first strategies. The demand for seamless, real-time financial solutions is rising among CFOs and treasurers, who are seeking more efficient methods to manage their capital. Virtual cards have gained popularity, with a 32% increase in usage year-over-year, highlighting their role as flexible, on-demand financial tools.
Despite these advances, challenges persist. Many financial solutions remain templated and lack personalization, which can hinder quick access to capital during urgent scenarios. Companies in regions like Central Europe and the Middle East report difficulties in obtaining tailored working capital solutions, highlighting a gap between corporate needs and the offerings of financial institutions.
The future role of CFOs and treasurers in managing working capital is expected to become increasingly strategic. As businesses grow, the ability to efficiently access and deploy capital will be crucial. Hewings from Visa emphasizes the necessity for proactive engagement with financial institutions to demand more customized solutions tailored to specific business models.
With interest rate fluctuations impacting borrowing costs, businesses must remain vigilant in their capital management strategies. The recent Visa report serves as a guide for financial institutions to address the needs of growth corporates, providing them with the tools required to seize new business opportunities without resorting to costly solutions.
