The top 2000 US & European companies by sales have over $1.2 Trillion cash unnecessarily tied up in Working capital (Inventory, Receivables & Payables), according to a recently released E&Y study as reported in this Reuters article.  The article quotes an E&Y executive as stating that companies need to focus on their working capital to free up cash for growth:


"Now's the time for companies to challenge their working capital performance and seek effective strategies to free up excess cash from the balance sheet to reduce net debt, fund growth or business transformation or even return value to shareholders"


Yet according to the latest Federal Reserve flow of funds report, US non-financial firms alone hold somewhere north of $2 Trillion in cash and marketable securities already!  And European companies are also holidng similar liquidity levels.  So, while cash flow performance and optimized working capital performance is crucial to a healthy business, the cash freed up from improvements in those areas has to go somewhere and do something.  The reality right now, however, is that until companies are comfortable enough with the economic environment to significantly accelerate their investment in growth, the cash freed up from better working capital performance is going into short tenor, liquidity investments and is not doing much of anything there, with yields under 1% APR.


As I have written before, and as plenty of articles over the past couple of years have pointed out, this is actually OK with many treasurers whose primary goal is preservation of capital and availability of liquidity, particularly in such a volatile and uncertain economic climate.  However, given the chance to preserve capital and liquidity, while ALSO earning a decent yield on that cash and delivering added value to shareholders, most would jump on that opportunity.  And many have done just that by investing in their supply chain to earn risk-free, high-yield returns that also reduce the liquidity risk in their vendor communities.


I will be presenting a webinar on this topic on June 21st with Vishal Patel of Ardent Partners.  In this webinar, we will share form our research and experience the following insights (among others):


  • How leading Treasury departments are collaborating with AP to open up new short-tenor investment opportunities
  • Best in class benchmarks that drive Working Capital and short term cash return improvement
  • 6 key Strategies for successfully creating and executing on the opportunity to invest cash in their supply chain
  • How other companies have utilized Dynamic Discounting to reduce risk in the supply chain while increasing their return on short term cash in a risk-free environment (Case studies).


If you are interested in learning how to meet your goals of capital preservation and liquidity, while still earning a high yield on some of that cash I encourage you to sign up for this free webinar to find out how others have done just that.