money go round update february 2018

Is your organisation a slow payer? The annual McGrathNicol Advisory annual Working Capital report shows the average working capital cycle of ASX-listed companies has lengthened, with around $288m more being held in working capital in 2017 than in 2016.

For the first time in the five years since the report began, companies took longer, on average, to collect payment from customers. Of the sampled companies, 63 per cent took longer to pay their suppliers and over 40 per cent did so by more than a week. On average, businesses held more inventory and took longer to collect cash from customers. To manage the cash-flow impact of longer inventory and collection cycles, payments to suppliers were delayed.

 

Capital at work february 2018 update

More than half the companies surveyed improved their working capital performance by driving better processes, demonstrating that sustainable improvement requires a concerted program of change.

The firm warns simply increasing the time taken to pay suppliers is not a sustainable strategy. “Long-term benefits of improving inventory management and billings/collections processes far outweigh the cash-flow impact of extending payment terms for suppliers.”

The report profiles the working capital performance of 160 ASX-listed companies across sectors including building products, construction, engineering, food and beverage, leisure, media, mining/resources, retail and transport.