By: Dr. Marco Alberto Huidobro
For decades, the governments of many countries have explored different ways to improve companies’ access to bank credit. In Mexico, one of the most popular strategies has been government participation in the credit market in order to channel financial resources from government-run development banks and promotion trusts to private companies.
But for years, there have also been questions about the role that government financial institutions play in promoting access to credit for private companies; some believe, for example, that their actions benefit primarily state-owned companies themselves, or that they do not share information that would encourage more lending by private banks. There even seems to be a lack of evidence that they encourage private banks to seek out new clients.
Does your Business Operate with a Mentality of Strengthening Working Capital?
Accenture
You survived the crisis… now what?
During an economic crisis, when credit markets shrink, many companies quickly change their strategy to maintain their working capital. With an eye to the short term, they may take actions like delaying payment to vendors as much as possible, while trying to make payments right at the deadline, or minimize inventory restocking. All of this in order to scrape together as much cash as possible to keep operations going. But we know that these actions are not sustainable.
When the crisis is over, the challenge faced by many organizations has less to do with survival than how to improve their working capital to fund investment and resume growth. To do so, they will need to introduce actions that are sustainable in the medium and long term, to manage their inventories and accounts receivable and payable processes in order to have the right impact on their working capital (Figure 1).
(read more…)