Volatile supply chains, large inventories, new late payment directive - the liquidity of many companies is at risk. How do you strengthen working capital in volatile times?

Due to global supply chains, companies face a variety of challenges and risks that have a direct impact on their working capital. External factors such as the war in Ukraine, inflation and interest rate reversals, as well as the COVID-19 pandemic, have shown how quickly conditions can deteriorate. Particularly with regard to disruptions in the supply chain, combined with fluctuations in demand, the current situation can lead to high inventory levels. These challenges, together with the proposed amendment to the EU Late Payment Directive to limit payment terms, are increasing the pressure on working capital enormously.

Disruptions in Supply Chains Lead to Bottlenecks and High Inventory Levels

The effects of current geopolitical conflicts have shown the far-reaching risks that can arise from unstable supply chains. The once smooth flow of raw materials and end products has come to a standstill, leading to production interruptions, full warehouses and lost sales.

Above all, it is the high inventory levels that put pressure on working capital, as they tie up capital that could otherwise be used for business investments or to cover other financial obligations. This can have a major impact on financial flexibility, especially if stocks cannot be sold quickly enough or if demand changes unexpectedly.

Additional Complexity due to Planned Amendment of the EU Late Payment Directive

The planned amendment to the EU Late Payment Directive, which is intended to ensure timely payment processing within the EU, has also gained immense importance since its announcement in September 2023. The planned amendment would stipulate that companies must pay within 30 days of receiving a supplier invoice, without exception. This is intended to help combat late payment, but if actually implemented, it would present many companies with massive problems in payment transactions and refinancing and potentially have a negative impact on both working capital and relationships with suppliers.

Optimized Working Capital Management in Unstable Times

In view of these problems, the effective strengthening of working capital is becoming increasingly important strategically. Innovative solutions in the area of working capital financing can play a decisive role here. This is because they enable financial flexibility, for instance by extending payment terms without involving suppliers. This can increase liquidity, improve balance sheet ratios and generate additional cash flow.

Many companies from various industries already rely on the service of innovative supply chain finance solutions, such as Kevin Kowalczyk, authorized signatory and Vice President Group Treasury at Ottobock SE & Co. KGaA. He uses cflox pay, an innovative product for optimizing working capital, and says: "With cflox pay, we have implemented an efficient payment transaction solution for controlling our working capital management and our cash flow. This solution is characterized, among other things, by the fact that it does not require the active involvement of suppliers and is fully integrated into existing processes."

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 its customers the optimization of payment terms and cash flow without the involvement of suppliers.

For more information visit cfloxpay.com

Press contact

Leonie Bauer

Content & Communications Manager

cflox GmbH

Gaußstraße 190c

22765 Hamburg

T   +49 1639267362

E   l.bauer@cflox.com