Corporations Report Significant Room for Improvement In How They Manage Working Capital
Online Survey Conducted by GTNews.com and Sponsored by Citigroup
New York, November 8, 2004
– Corporations are reporting significant room for improvement
in how their companies manage working capital according to the second
annual survey conducted by GTNews.com and sponsored by Citigroup
Global Transaction Services. Eighty eight percent (88%) of corporate
treasurers said that Treasury has a key role to play in their company’s
working capital management, but only 24% of treasurers reported
taking a leadership role in initiatives to improve their organization’s
accounts payable (AP) and accounts receivable (AR) processes.
When asked about the quality of their internal processes, 49% of
those surveyed rated their company’s AP processes and 43%
rated AR processes as poor or average and only 35% rated their inventory
cycle processes as above average or better. Common reasons for these
results cited by respondents included a lack of integrated systems,
senior management’s neglect of AP and AR reporting in favor
of other priorities, inconsistent reporting by subsidiaries, and
a lack of inter-company coordination. And despite robust technology
platforms, many companies reported being constrained by suboptimal
processes and still rely on manual processes to consolidate, track
and measure their working capital performance.
Firms with decentralized treasury structures face greater challenges in effectively managing their working capital than their more centralized counterparts and there is a significant gap between corporate goals and subsidiary-level incentives within organizations. 47% of respondents indicated that subsidiaries were not rewarded for achieving working capital objectives. The majority of respondents also indicated that their companies’ corporate goals are not aligned with the individual incentives of key employees. Only 46% of those surveyed said their company provided incentives to treasury staff in order to achieve working capital objectives and less than 30% set incentives within procurement groups.
In the area of reporting, the majority of Treasurers (76 %) reported the need to draw data from multiple sources and consolidate data internally, entailing time-consuming and often manual processes and increasing potential for error. Treasurers also reported that most lead banks are meeting client demand for up-to-date information but companies rarely obtain enhanced reporting capabilities from non-lead banks.
On a positive note, companies are gradually transitioning from monthly reporting either to more frequent reporting cycles or to systems that allow real-time access to working capital data “on demand.” The practice of sharing inventory data across the supply chain is being adopted by an increasing number of firms with over 40% of respondents engaging in this practice at some level. Sarbanes-Oxley also has had a far-reaching impact on the majority of companies in elevating the importance of accurate reporting. Of the respondents affected by the legislation, the vast majority (85%) believed that their documentation of AP and AR processes was satisfactory for compliance purposes.
“The objective of this survey was to assess the role of corporate treasuries in establishing best practice working capital management within their companies. We are pleased to see the results confirm that Treasurers recognize the opportunity to create value in this area of their organization, said Diane Quinn, Director, Working Capital Products for Citigroup Global Transaction Services. “In fact, in conversations with clients around the world, we demonstrate how to achieve significant cost savings through better working capital management,” she concluded.
This electronic survey was sent in July 2004 to registered corporate subscribers of GTNews and the survey results are based on responses received from 168 corporate treasury and finance professionals around the world. Further analysis and details of the survey can be found at: http://www.gtnews.com.
About Citigroup
Citigroup (NYSE: C), the pre-eminent global financial services company
with some 200 million customer accounts in more than 100 countries,
provides consumers, corporations, governments and institutions with
a broad range of financial products and services, including consumer
banking and credit, corporate and investment banking, insurance,
securities brokerage, and asset management. Major brand names under
Citigroup’s trademark red umbrella include Citibank, CitiFinancial,
Primerica, Salomon Smith Barney, Banamex, and Travelers Life and
Annuity. Additional information may be found at: www.citigroup.com.
About Citigroup Global Transaction Services
Citigroup® Global Transaction Services is a leading
provider of integrated cash management, trade finance, funds and
securities services for corporations, financial institutions, intermediaries
and governments around the world. With over $ 121 billion in average
liability balances, more than $ 7.3 trillion in assets under custody
and the largest proprietary branch network, Citigroup’s award-winning
operating systems and Internet-based delivery channels enable clients
to manage and monitor working capital and investments more efficiently,
streamline transaction processing cycles, and re-engineer receivables
and payment processes. Citigroup® Global Transaction Services
provides clients with access to Citigroup’s full range of
capabilities and solutions along with an on-the-ground presence
and in-depth knowledge of more than 90 local markets. For additional
information, see www.transactionservices.citigroup.com.
About gtnews.com
www.gtnews.com is the number one global information resource for
finance and treasury professionals. Updated weekly, gtnews provides
informed commentary, news and analysis from hundreds of key players
throughout the finance and treasury sector. Topics covered include
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and treasury professionals from corporations and banks in over 100 countries. Further details can be found at www.gtnews.com.
