Staying on Top of Working Capital

Announcer  00:04

Welcome to the Treasury Update Podcast presented by Strategic Treasurer, your source for interesting treasury news, analysis, and insights in your car, at the gym, or wherever you decide to tune it.

Craig Jeffery  00:17

Welcome to the Treasury Update Podcast. This is Craig Jeffery. Today I have a special guest, Mike Hewitt, we’re talking about working capital. And he is hosting a working capital forum in Amsterdam. And I wanted to get some of his insights into what’s going to take place and why this is important. Mike, welcome to the podcast.

Mike Hewitt  00:38

Thanks for having me, Craig. It’s great to be here.

Craig Jeffery  00:41

It’s good to talk over the internet airwaves, if you will, and, and talking these items. But but just as a background to the to the forum. As we look at working capital management, we see that it sits usually in one of the top three focus areas for treasury in any given year, you know, year over year, it might be number one, it might be number three. And this fluctuation can occur for a number of different factors. And your firm was the middle of hosting an award ceremony and educational events focused on working capital topics with a dialogue presentation panel discussions, really interesting items. And I’m looking forward to joining you in Amsterdam. But maybe you could give us some background on what your firm does broadly. So maybe you could emphasize a little bit about what you do at the working capital events or the working capital forum.

Mike Hewitt  01:31

Absolutely. So we’ve been in business for around 10 years. And we started really to give corporate treasurers a chance to get together and connect with each other, but also with you know, solution providers and service providers who might possibly have some answers to the questions. Since then we’ve grown and main brands now are Treasury Dragons, which is about treasury technology, mainly online. But the Working Capital Forum is a major international networking group. And its members are corporate treasurers. But also people from let’s call them adjacent roles in that Venn diagram of treasury. We have procurement people who overlap with treasury when it comes to running supplier finance programs, for example. We have some pure finance people, and a few technology people as well. And we meet in cities around the world. So our most recent ones, Stockholm in June, New York last month, and as you rightly said, Amsterdam in December.  They tend to be off the record, which gives treasurers the chance to really open up about what, what matters to them. And more importantly, Craig gives me a chance to enjoy lunch in several pleasant cities around the world.

Craig Jeffery  02:48

And getting back. Getting back to physically meeting people is a is a privilege. You’ve had Stockholm, New York City and Amsterdam is coming up in December. When is what are the exact dates for the event? And is it too late to register?

Mike Hewitt  03:05

It isn’t too late to register. We’re on the first of December, and it’s the Beurs van Berlage in Amsterdam, I had to have tuition from my Dutch colleagues to pronounce that even close to correctly. It’s the former stock exchange in the middle of Amsterdam, you can register. It’s all at workingcapitalforumeurope.com. So quite logical. And the really great thing is if you’re a corporate treasurer, or a corporate in the procurement space, it’s free to attend. Although tragically, if you’re a service provider, you are going to have to pay us something.  But for treasurers it’s completely free.

Craig Jeffery  03:41

That is that is both logical and appropriate. You know, as we shift part of our discussion to learning and talking about things, you mentioned that the delegates will be coming from treasury and adjacent spaces. Working capital is really a area that touches on multiple, multiple groups. And to be really efficient and effective. It requires involvement in multiple parties. You know, as these delegates come to this event, or Amsterdam, what are they hoping to learn and achieve? You know, in addition to this confidential dialogue, what are they what are they seeking to gain?

04:18

Well, we often ask our delegates what they found most valuable and that feeds back into how we structure events going forward. And the number one thing they tell us they want to hear is examples of how other people in their position have achieved similar objectives. So a typical scenario for us is the corporate treasurer will be told or advised by the CFO that look, working capital is a real priority. And they’re looking for tools and techniques to help them achieve working capital goals. But most importantly, they want to say well, how have other companies a little bit like us address the same problems I’ve addressed and can I learn from their experience? So they’re definitely coming to hear from companies like Coca Cola, Pepco, Dan Foss and Henkel big German FMCG company about how they’ve tackled those challenges. They’re also interested in some of the technology that’s advancing quite quickly in this space. So the old days of spreadsheets and multiple emails and phone calls to banks to arrange for working capital financing are being replaced, as we all know, by platforms, cloud based solutions that allow treasurer’s to have more fingertip control. And we certainly have plenty of those service and solution providers at the event talking about and getting live demonstrations of what they can do for treasury.

Craig Jeffery  05:39

I’m trying to figure out how to ask this question, Mike, I mean, the situation of the environment impacts what goes on with working capital, macroeconomic elements. The technology, as you talked about, fit into that how much of an emphasis is on the macro environment and information and guidance that is as current and relevant versus timeless?

06:04

Thanks, Craig.  We opened the day with the chief economist of Rabobank, who’s giving us an update on those macro economic trends. And there’s no doubt that right now, we’re all too familiar with rising interest rates, with inflation, with continuing supply chain shocks, both post COVID and because of the war in Ukraine, and that’s creating an environment in which the certainties that many treasurers have worked with, for the past decade have kind of gone, I’m old enough to remember previous time of interest rates when cash was not free. And anything you did had to factor in the cost of cash. For lots of people who are, let’s say, under 30. That’s not a thing they’ve ever experienced before. So there’s been a big switch in the way we think about cash, cash forecasting and working capital, as we move into an era where interest rates are going to continue to rise, and where the cost of capital for companies is going up constantly. So a good example is inventory, which just post COVID, we switched from just in time, which was the watchword, keep your inventory slim. Everyone said, Oh, supply chain shocks now we must have just in case.  Build up inventory, build up stocks. Now in a kind of third wave, people are saying Well hang on a second, the cash that’s locked in that industry. Now. Inventory now has a cost. And we need to start thinking differently about how we manage inventory. And that’s why inventory finance is one of our agenda items for Amsterdam. So a complete change to the way people think about cash and therefore about working capital.

Craig Jeffery  07:44

This returned, emphasis or heightened emphasis on forecasting visibility, liquidity, and of course, working capital is part of this overall liquidity management perspective. I guess we’ve seen a rise of terms extension on the payment side supply chain finances you had talked about this comes from the obvious reasons, some of what you mentioned, as well as perhaps some non obvious points of view, is that come up there what or do you see any other influencers out there that are pushing this focus on forecasting? You know, beyond just the macroeconomic elements?

08:20

Yeah, well, there’s there’s two elements combined to to push your renewed interest in forecasting. One of them is very simple, it’s that the technology for managing cash forecasting is getting better. And that’s raising expectations of what’s possible. So the old days of running a spreadsheet and maybe calling in a few data points from around the business and then manually producing a cash forecast or going so certainly that technology piece is part of the emphasis on on cash forecasting. And the other is that company wide cash culture, which is related to the issues we’ve just discussed. Again, you and I will both remember that 2008 crash and suddenly everyone was focused on cash. And it’s a little bit like that again. Now boards are more cash focused, and therefore treasurer’s are being asked to provide ever more granular, ever more up to date cash forecasts, and then now turning to technology to help them provide that service.

Craig Jeffery  09:23

Thank you so much for those points in that feedback. I look forward to seeing you in Amsterdam, in the near term. And we’ll point everybody to the show notes the for the link the workingcapitalforumeurope.com. I hope many of you in the audience can join Mike and I there. Mike, thanks for your comments.

Mike Hewitt  09:42

Hey, you’re very welcome. It was great to be here and I look forward to seeing you in Amsterdam.

Announcer  09:48

You’ve reached the end of another episode of the Treasury Update Podcast. Be sure to follow Strategic Treasurer on LinkedIn. Just search for Strategic Treasure This podcast is provided for informational purposes only and statements made by Strategic Treasurer LLC on this podcast are not intended as legal, business, consulting, or tax advice for more information visit and bookmark StrategicTreasurer.com.