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Catherine Metcalfe has conducted a survey into working capital management practices at one hundred manufacturing and technology companies in the Thames Valley.

The survey, comprising interviews with company directors and an analysis of financial statements, found that mid-sized company directors and managers have identified ways to source money internally in the absence of external finance.

The pressure to find money in this way comes from a number of sources. All businesses which participated in the interviews maintain continuing investment in new technology. Many plan to expand into emerging markets. None of the interviewees mentioned either bank finance or public stock markets as an avenue to which they could turn.

Additional trading during 2010 to 2011 presented a circular dilemma for some respondents, setting up a need for finance which, it seemed, could be resolved only by trading still more. At least one company, constrained by its need to achieve constant innovation and growth and the aggressive profits targets of its venture capital funders, was forced to maintain a tricky balance between sourcing cash and maintaining profits growth.

On top of difficulties in sourcinv affordable finance come external pressures.

Rising prices of metals and paper (including a more than 70 per cent increse in the paper price index during the past year alone) were highlighted, along with the minimal gains to be had by holding cash.

Technology companies in the sample cited the existence of aggressive Chinese competitors with access to Government money.

Some companies were supplying to blue-chip customers who squeezed them on payment terms.

Globalisation compounded the pressures. One company, supplied by a fellow group company based overseas, had to work with lead times of up to 6 weeks. Another business, although cash rich in the UK, had to act as a funder for its global business.

Changing business models for IT companies in the region means that these companies are moving from a position in which they recieved cash up-front to one where they must pay in advance. One Chief Financial Officer commented that "Our licence income is not growing. They only way we can grow relates to the speed of designing things and getting them out there to market. It's all related to the speed of the working capital cycle".

Since 2007, finance directos have taken aggressive initiatives to reduce working capital, many resulting in impressive reductions in receivables and inventory. These have included:-

Negotiating with customers on terms;

Advance payments;

Changing the date on which customers are billed;

Incentivising credit controllers with bonuses;

Improvements in accounting procedures;

Closer screening of new customers.

Half of the manufacturing interviewees said that their companies had taken recent initiaitives to cut stocks.

Find out about what companies in the Thames Valley are doing to drive cash flow

Read the survey

Driving cash flow through management of working capital

Summary of survey results from one hundred manufacturing and technology companies in the Thames Valley

To find out more, email earn.more@moneyworkshopsforbusiness.com