The gap between working capital levels of large corporations and small enterprises has increased from 7.6 percentage points in 2011 to 10.6 percentage points this year, according to PwC’s global working capital survey, which tracks companies’ successes in optimising working capital.
Whilst large corporates have improved their working capital performance, small enterprises have experienced a sharp deterioration.
In the same comparison large companies were able to generate more cash from operations, partially driven by their lower working capital funding requirements, the survey findings revealed. Small enterprises have to rely more on external debt to close their funding gap and combined with their comparatively higher interest rates, they are placed at a competitive disadvantage.
Addressing their working capital inefficiencies could generate the cash required to break this cycle address the disadvantage.
The survey reveals, working capital has shown significant improvement globally, as companies are waking up to the importance of cash vs profit. This improvement contributed to a jump of 11.3 per cent in the cash-on-hand.
The research uncovered a regional performance gap as well. Asian companies have some of the highest net working capital (NWC) percentage and the worst cash conversion efficiency, as their working capital performance deteriorated the most in the last 5 years.
Read the whole report here .