Economic developments will present companies with even greater challenges in the coming year - be it rising prices or disruptions in supply chains, the threat of tariffs, import restrictions or other circumstances. Thomas Krings, Managing Partner at cflox, takes a look at the difficult tasks that international supply chains will face in the coming year and why working capital management will play an increasingly important role for companies.

Hardly any company today is no longer dependent on international trade and supply chains in some way - whether directly or indirectly. In view of global uncertainties and increasing protectionist tendencies worldwide, the effects of an increasingly “rougher” global economy are being felt by everyone.

Companies are already confronted with massive structural changes: A comprehensive need to adapt existing business models and, not least, the challenges of climate change require companies to make major investments in the future of businesses. Entire sectors will be even more in the spotlight of pent-up demand in 2025. At the same time, rising prices and increasing uncertainty are making customers and consumers reluctant to buy. Weak macroeconomic development and a lack of investment in infrastructure are doing the rest.

We have recently observed a renewed increase in protectionist political measures in many regions of the world. Announcements and threats regarding planned tariffs or import restrictions are leading to countermeasures by the countries and regions affected, resulting in a reciprocal escalation - but in the end, those affected are companies that depend on reliable and efficient international supply chains, as well as their customers. The risk of higher costs, additional work due to more bureaucracy and delays or even delivery failures increases.

Growing Importance of Liquidity Management

This means that two points in particular will become even more important for companies in the future: Firstly, securing their own supply chains. After all, higher customs duties, for example, can not only result in additional costs - a company's own suppliers may also look for new sales markets due to the higher costs and falling margins and may lose suppliers at short notice. In addition to supplier management, this also increases the need to maintain capital in order to be able to access other sources of goods and raw materials at short notice.

Secondly, the management of liquidity and cash flow as a whole will have to take on even greater importance. The global and macroeconomic challenges already mentioned will have a negative impact on companies' business developments and forecasts and therefore on their ratings, meaning that we will see greater reluctance on the part of financing partners to grant loans in 2025. Accordingly, it will become even more important in future to strengthen our own supplier relationships and to take the issue of ESG even more seriously - because companies that invest in sustainability are less vulnerable and more profitable in the long term, which has a positive impact on their credit rating.

Conflict Between Supplier Claims and Liquidity Requirements

In 2024, there were great fears about the intended amendments to the European Union's Late Payment Directive, which were ultimately not adopted after all. In its original draft, payment terms in the supply chain were to be limited to 30 days, thus explicitly restricting contractual freedom - which is simply unrealistic. Nevertheless, we are sure that the EU will decide on an update, presumably on the basis of a payment term of 60 days while retaining freedom of contract between buyers and suppliers. What exactly this will look like and when we can expect it remains to be seen.

However, it is also clear that long payment terms can lead to liquidity bottlenecks, especially for smaller suppliers, and pose serious problems for them. As we know from our own customers, their suppliers - regardless of size - are very important to them through the bank. However, due to the increasing need to maintain liquidity on a permanent basis, many companies are faced with the dilemma of having to choose between fast payment and the provision of funds. In order to resolve this dilemma, companies will continue to look for practicable working capital instruments to ensure their own liquidity ratios at the same time.

Ensuring liquidity and cash flow at all times will have to remain a top priority for companies - because this is the most important “raw material” for sustainable corporate development. In order to simultaneously secure their own supply chains and maintain partnership-based relationships with suppliers with punctual or even early payments, companies can now rely on modern supply chain finance solutions. This allows them to manage their liquidity and payment targets flexibly and without complex processes in such a way that they can strengthen their own financial stability and their supplier relationships in the long term and are prepared for the challenges ahead.

About cflox

cflox is an international payment institution that combines payment transactions with working capital and financing to create unique solutions. With a focus on supply chain finance, cflox offers customers the optimization of payment terms and cash flow without the involvement of suppliers.

Working with nine established financing partners and managing over 100 active customer programs, cflox provides tailored solutions to strengthen liquidity and supply chain efficiency.

cflox GmbH is headquartered in Hamburg and is registered as a payment institution (Payment Services Supervision Act - ZAG) for the provision of payment services in Germany with the Federal Financial Supervisory Authority (BaFin).

For more information visit cfloxpay.com

Press contact

Leonie Bauer

Content & Communications Manager

cflox GmbH

Gaußstraße 190c

22765 Hamburg

l.bauer@cflox.com