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Introduction ASYX and Accenture have launched the first working capital survey among Dutch suppliers. We would like to thank all participants that have participated in the survey and made a success.

 Target audience were Dutch suppliers in a business to business relationship  CFO’s and Finance managers  137 respondents  Both SME (44%) and large (56%) companies participated  Overall question: how does your company manage working capital vis-à-vis trade partners? The overall objective of the survey was to find out how your company manages working capital visà-vis trade partners. The results of this survey are very interesting and have helped us improve our working capital solutions for your company!

Executive summary Below you will find a summary on the findings of the result.  78% of the respondents say the importance of improving working capital has increased during the last 6 months. Greater importance was given by large companies.  91% had difficulty getting financing from banks over the last six months.  Average “payment days” is 44, with 30 days for terms and 14 days for collection afterwards. This is well below European averages for the main industries.  35% of the suppliers have been asked to stretch payment terms by their main customers with an average of 28 additional days.  25% of the suppliers offer an early payment discount (average 2%) and 11% used factoring services as a way to improve Days Sales Outstanding (DSO).


 29% of the suppliers that currently do not offer early payment discounts would consider offering it. This means the total group that is offering and willing to offer Early Payment discounts is 54%.  61% was not aware of the concept of reverse factoring.  47% showed interest in reverse factoring services  65% of the suppliers want to collect account receivables quicker


This survey was made to find out how Dutch suppliers financial managers’ manage their net working capital vis-à-vis trade partners. The survey took place from June to end August of 2009. In total 137 financial managers answered the questionnaire online. Both, SME and large companies answered the questionnaire. Forty-four percent were SME and fifty-six percent large companies. In this survey SME are defined as companies with a maximum turnover of €50 millions. Large companies are defined as companies with a turnover greater than €50 millions. Is currently working capital an important part of Dutch businesses? How fast are Dutch suppliers getting paid? Is it normal for Dutch suppliers to offer an early payment discount? These questions and more are answered through the findings of this survey. In other words, results show how Dutch companies manage their current cash. In general, Dutch companies have a focus on improving their working capital position. Respondents were asked to rate how they agree/disagree with the following statement: Currently, the importance of working capital has strongly increased in my company. 78% of the financial managers perceived that the relevance of working capital has increased in their companies. The figures showed to be more significant for the large companies, where 41% showed to strongly agree with the statement compared to 18% for the SME (Chart # 1). In respect to the business sectors, opinions are generally spread. Noticeable was the manufacturing sector was the only sector that did not disagreed with the statement. Chart # 1: Currently, the importance of working capital has strongly increased in my company. SME

Large Companies

2% 8%

Strongly agree 18%

27%

10%

6%

Agree

Strongly agree 41%

Agree

Neutral 45%

Disagree Strongly disagree

Neutral 43%

Disagree

Source: Asyx & Accenture Working Capital Survey Obtaining funding from banks is still perceived as difficult. During the last 6 months, the effects of the financial crisis were felt and the difficulty to access funding from banks has been a frequent topic on the news. From this survey, almost two-fifth of the financial managers respondents still think that obtaining funding from banks during this period has been a hard task and only 9% think that this has been easy. Though, more than onefifth has a neutral opinion. Striking however is that 26% does not know how this has been. When compared in terms by size, sector and/or industry no major differences were found.


Chart # 2: How easy or difficult has it been for the company to obtain funding from your bank during these last 6 months?

26%

Very easy

4%5%

Easy 28%

Neutral Difficult

12%

Very Difficult 25%

Don’t know

Source: Asyx & Accenture Working Capital Survey Average working capital loan interest is 5%... A working capital loan is a short-term business loan financing the purchase of incomegenerating assets, principally inventory. Working capital loans are generally written with lending terms requiring full payment within a specified period, such as 60 days or 90 days from the date the funds are advanced. From this survey it was found that in general, the average interest charged for a working capital loan by banks is 5%. This is also the average interest is for the SMEs and for large companies. 35% of the suppliers have been asked to stretch payment terms by their main customers. SME experience this more than the large companies… During these last 6 months, 35% of the respondents said that their main customer(s) have asked them to extend their payment terms. They have asked to extend payment terms with an average of 28 extra days. In terms of company size, 33% of the SME are experiencing this tendency with an average of 31 extra days being asked. On the other hand, 39% of the large companies have been experiencing this with an average of 25 extra days. Chart # 3: Has your main customer(s) asked the company to extend their credit term during these last 6 months? Please specify when needed

33%

Yes Don’t know

59% 8%

No

Source: Asyx & Accenture Working Capital Survey


On average, businesses get paid 13 days later than agreed. SME have shorter payment terms than large companies but they get paid 3 days later than their counterpart… This survey found that in general the average payment term is of 30 days. On the other hand, the average collection term is of 44 days. Though, impressive is that SMEs have shorter payment terms (28 days) compared to the large companies that have an average of 32 days (Chart # 4). In other words, this means that in average large companies get paid 12 days later than the due date while SME get paid 15 days later. Chart # 4: Difference between payment terms and collection terms

45 42

Average collection term 32

Average payment term

28 0

10

20

Large companies

30

40

50

SME

Source: Asyx & Accenture Working Capital Survey Visible interest to collect account receivables quicker… 65% stated an interest in collecting account receivables quicker. From which more than onefourth stated to be “very interested”. Still, 17% of the financial managers that answered the survey stated to be uninterested in faster collections of accounts receivables. Chart # 5: How interested or not are you in collecting the company’s accounts receivable as quickly as possible? 3% very interested

9% 8%

26%

Interested neutral

15%

not very interested 39%

not interested don't know

Source: Asyx & Accenture Working Capital Survey Is supplier early payment discount and factoring common methods to trigger earlier collection for Dutch suppliers? How many companies are currently using these?


One quarter of the companies offered an early payment discount with 2% discount on average. Large companies offer early payment discount more than SME‌ One quarter of the companies offered an early payment discount. The offered discount is of 2% on average. On the other hand, three quarters said that they do not offer this discount but 29% would consider offering it. Though, 46% will even not consider offering it. In respect to the company size, it was notable that large companies offer this discount more than SME. In fact 33% of the large companies do offer an early payment discount compared to 13% of the SME that do. Chart # 6: Does the company offer early payment discounts in order to stimulate early collections? SME

Large Companies No and we would not consider it

13%

No but we would consider it 33%

54%

No and we would not consider it 33%

41%

Yes 26%

No but we would consider it Yes

Source: Asyx & Accenture Working Capital Survey Traditional factoring is not commonly used among respondents‌ Almost 90% of the respondents stated that they do not use traditional factoring services. In respect to company size, it appears that 75% of the users of factoring are large companies and 25% SMEs. Chart # 7: Factoring (receiving financing on accounts receivables) is a commonly used method approach to improve your cash position. Are you using this?

11%

No Yes 89%

Source: Asyx & Accenture Working Capital Survey


61% of the Dutch financial managers’ that answered the survey are not aware of the concept of reverse factoring‌ From this survey, 61% of the financial managers showed to be not aware of the concept of reverse factoring. From this group that is not aware, 18% are interested in using this service (including 6% that is very interested) and 22% has a neutral opinion. However, 59% showed to be not interested or very interested in the idea. From the respondents that were aware of reverse factoring, the greater part (36%) showed to have a neutral position regarding their interest in using this service. Though, 41% stated to be not very interested or not interested. On the other hand, 21% are still interested in the concept of reverse factoring. Chart # 8: Were you aware of the possibility to receive financing on accounts receivables through means of reverse factoring?

39%

No Yes

61%

Source: Asyx & Accenture Working Capital Survey 20% are interested in using reverse factoring and 27% of the respondents have a neutral opinion‌ In general, 27% had a neutral position regarding their interest for reverse factoring and 2% did not know. Still, 20% showed to be in some way interested in the idea. On the other hand, in total 51% are not (very) interested. Comparing to business sector, the manufacturing sector showed to have a more positive interest than the other sectors. Chart # 9: Interest for reverse factoring compared by Business Sector

very interested Wholesale

interested neutral

Services

not very interested Manufacturing

not interested 0%

20%

40%

60%

80%

100%

don't know


Source: Asyx & Accenture Working Capital Survey

KEY FINDINGS

Below you will find a summary on the findings of the result.  78% of the respondents say the importance of improving working capital has increased during the last 6 months. Greater importance was given by large companies.  91% had difficulty getting financing from banks over the last six months.  Average “payment days” is 44, with 30 days for terms and 14 days for collection afterwards. This is well below European averages for the main industries.  35% of the suppliers have been asked to stretch payment terms by their main customers with an average of 28 additional days.  25% of the suppliers offer an early payment discount (average 2%) and 11% used factoring services as a way to improve Days Sales Outstanding (DSO).  29% of the suppliers that currently do not offer early payment discounts would consider offering it. This means the total group that is offering and willing to offer Early Payment discounts is 54%.  61% was not aware of the concept of reverse factoring.  47% showed interest in reverse factoring services  65% of the suppliers want to collect account receivables quicker

What does this mean?  Historically Payment terms have been favourable for suppliers in The Netherlands. This trend is shifting, where payment terms are being extended in line with European averages. Working Capital at the Supplier side is under pressure.  Buyers, Suppliers and Financial Institutions have to work together to find a solution for this problem.  Buyers with good financial standing can help suppliers to improve their working capital position without changing the payment terms.  54% of the suppliers is willing to offer Early Payment discounts. So Buyers can improve their margin and help suppliers at the same time.  It’s all about costs: Reverse Factoring has lower costs than current suppliers early payment discounts of 2% for 30 days (>24% on an annual base) This is the moment to introduce Reverse Factoring and ASYX is more than happy to explain the benefits of this program for your company. Please contact Roel Elshout if you would like to know more. roel.elshout@asyx.com.


ASYX working capital servey