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Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or
distributed to parties outside the presentation. DBS Bank accepts no liability whatsoever with respect to the use of this document or its contents.
The New Normal in Working Capital
Management
#DBSSMEWebinar
December 19, 2013
Topics for today’s webinar
2
Evolving trends in supply chain and working
capital management
Agenda
Working Capital: Tapping the multi-billion
opportunity in trapped cash
What DBS can do for you: Working Capital
Diagnostics and product solutions
3
Based on survey of 1600 companies by Atradius on B2B businesses
Source: DBS; Atradius Payments Practices Barometer, Nov 2013
Cash remains King, especially in India
Account Payables
Inventory
Account Receivables “What will be the greatest challenge to your profitability in 2013?”
34
32
32
31
37
36
31
35
28
26
24
25
18
17
21
14
56
50
53
55
52
Singapore
China
Japan
Hong Kong
India
Australia
Indonesia
Taiwan
62
58
57
Collection of
Outstanding invoices
Maintaining Adequate
CashFlow Percent of respondents
4
However, India has the highest proportion of uncollectable B2B receivables...
China 4.3
Australia 3.9
Japan 2.1
Hong Kong 6.1
Indonesia 5.6
Taiwan 4.4
Avg. = 5.0
India 7.7
Singapore 6.2
7.2
6.5
4.4
4.4
4.4
3.6
5.5
3.4
Avg. = 4.9
“Over the last 6 months, what percentage of the total value of
your B2B receivables were uncollectable?” Percentage
Domestic Foreign
India uncollectable
rate (7.7%
domestic/7.2% foreign)
highest among all
countries surveyed
Also higher than
Americas (5.8%/6.4%)
and Europe rate
(4.6%/4.2%)
Driven by customers
being bankrupt or out
of business and/or
failure of collection
attempts
Source: Atradius Payments Survey (Nov 2013) of 1,670 companies on B2B payments (n=214 in India); DBS
5
...as well as the largest Days Sales Outstanding
51
51
45
81
58
55
54
53
Indonesia
Japan
Taiwan
China
Singapore
Hong Kong
Australia
India
“What is your company annual
average Days Sales
Outstanding?” Days
Source: Atradius Payments Survey (Nov 2013) of 1,670 companies on B2B payments (n=214 in India); DBS
Marked increase in
average DSO across Asia
Pacific from 48 days to 56
days (Nov ’12 to ’13)
India average DSO (81
days) largest in survey;
40% more than next
largest country (81d vs.
58d for Indonesia)
Lack of focus on early
warning system in India
may have led to increased
DSO
- Only 26% of India
respondents got
concerned when
payments are 1-30 days
late
26%
50%
40%
19%
20%
27%
26%
38%
“According to your company's credit
policy, when does your DSO level
become a concern?” Percentage of respondents who answered "1-30
days longer than payment term“ 1
1 Other responses were “31-60 days longer”, “61-90 days longer” and “90+ days longer”
6
0 20 40 60 80 100 120 140 160 180
Infra-Construction
Hospital
Machine Tools
Pharma
Industrial paper
Steel Reroller
Steel: Pig/Sponge iron
Electrical Equipments
Heavy Engineering
Leather
Plastic Pipe and Fittings
Wheat Milling
Wood
Textile
Irrigation
Dyes and Pigments
Hotel/ Resorts
Packaging / Printing
Plastic products
Transport
Auto
127
65
75
95
85
90
75
95
143
105
123
80
75
105
175
85
85
75
95
80
90
Working Capital Trends Across SME
7
We estimate up to $2.7 trillion in “trapped cash” in key Asian
Markets
Hong Kong Singapore South East
Asia1
China Total
Listed Firms
($,Bn) 21 18 333 247 619
Non Listed
Firms ($,Bn) 34 36 1541 447 2058
USD 55 Bn USD 54 Bn
USD 1,874 Bn
USD 694 Bn USD 2,677 Bn
Source: DBS Research, IHS, Mckinsey
Majority of the
“trapped” working
capital improvement
opportunities are
developing
countries
USD billions
1 South East Asia includes Taiwan, Indonesia and India
8
SMEs require intense focus on Cash conversion cycle, due to
many competing products and limited cash / credit available