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May 3, 2024

Business leaders optimistic despite working capital challenges

Business leaders worldwide remain optimistic for 2024, despite the risk of inflation and long cash conversion cycles, which threaten access to the working capital needed for growth, says a report from C2FO, an on-demand working capital platform. The 2024 Working Capital Survey says 32 percent of business leaders still expect revenues to grow by more than 10 percent.

The survey also shows that nearly one in four businesses don't have access to enough capital to operate for a year, although most respondents say they currently have the liquidity they need. Nearly 60 percent say that increasingly longer payment terms with customers require them to find alternative sources of working capital to fund their growth goals.

Despite challenges, most companies' overall economic outlook remains positive. Globally, 78 percent of companies are expecting revenue growth. Forty-three percent say they expect to increase headcount, while only three percent predict a more than 10 percent headcount reduction. In addition, 59 percent plan to increase prices by one to 10 percent, suggesting inflation may still be hard to beat in 2024.

"Many businesses are seeing conditions improve, but the post-pandemic pains still remain,” says Colin Sharp, chief sales officer with C2FO. “Supply chain issues can pop up, and worker shortages and labour costs still threaten nearly half of the survey respondents. They can't control the economy, but they do have more flexibility and control over the health of their cash flows than they might realize."

He says with loans becoming more expensive or out of reach, businesses looking to strengthen their capital can get more out of their cash flows by looking outside traditional borrowing. Dynamic discounting is one such approach. This model helps businesses get paid early for their outstanding invoices in exchange for a small discount. It differs from the more well-known practice of invoice factoring, which often comes with higher costs and greater disruption.

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