Optimize Working Capital with Improved Cash Management

As cost of credit rises with higher interest rates, companies embrace vigilant working capital management to unlock cash, the Wall Street Journal reports

With the cost of borrowing increasing, the Wall Street Journal reports, financial leaders are looking to improve their cash management practices to optimize working capital. The moves they are making include working to speed AP payments and proactively managing collections to positively impact their cash conversion cycles.

“When interest rates were at 0%, having excess cash or using lines of credit was easy and it was relatively inexpensive. Now, as we are quickly approaching a 4% or 5% interest rate environment, which we haven’t seen since 2007, executives are looking at their cash flows,” the Journal quoted Greg Kavanaugh, who oversees product development for global transaction services at Bank of America Corp., as saying.

Simply put, “It’s always cheaper to access your own money,” as István Bodó, a director at business advisory firm Hackett Group Inc., told the paper.

The Journal included new data indicating a third quarter trend toward cash conversion cycles becoming more drawn out. “The cash conversion cycle — an estimate of the average time it takes to convert working capital to cash — deteriorated to 61.6 days among companies in the S&P 500 that reported financial results as of Wednesday morning, according to S&P, compared with 55.4 days a year ago,” the paper reported, providing further incentive for business leaders to more closely manage AP, AR and working capital.

Read the full article here: Rising Rates Boost Companies’ Focus on Working Capital Management

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**Deposit placement through ICS is subject to the terms, conditions, and disclosures in the applicable agreements. Although deposits are placed in increments that do not exceed the FDIC standard maximum deposit insurance amount (“SMDIA”) at any one destination bank, a depositor’s balances at the institution that places deposits may exceed the SMDIA (e.g., before settlement for deposits or after settlement for withdrawals) or be uninsured (if the placing institution is not an insured bank). The depositor must make any necessary arrangements to protect such balances consistent with applicable law and must determine whether placement through ICS satisfies any restrictions on its deposits. A list identifying IntraFi network bank

Optimize Working Capital with Improved Cash Management

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