While the recession inspired big gains in the working capital metrics of U.S. companies in 2009 and 2010, since then progress has stalled, according to consultancy REL.
Working capital measures the extent to which a company’s liquidity is tied up in its receivables, payables and inventories. When the economy slowed, companies were motivated to squeeze as much liquidity out of those areas as they could.
Shahrokh Moinian, head of trade finance and cash management for corporates Americas, Global Transaction Banking at Deutsche Bank, said he has seen some multinational companies name a senior executive as head of working capital, illustrating the importance of this activity within the finance and treasury functions and helping to further fuel the growth of supply chain finance.
While treasurers may not be in charge of working capital, Ron Chakravarti, managing director and head of liquidity solutions and treasury advisory for Citi Treasury and Trade Solutions, said they can play an important role in educating other parts of the company about why working capital matters.