Visa: Working Capital Strategies Best at Top-Performing Middle-Market Firms

A strategic, forward-thinking approach to working capital helps separate top-performing middle-market firms from their peers, according to Visa.

The latest release of the “2023-2024 Growth Corporates Working Capital Index,” noted that middle-market firms with revenues between $50 million to $1 billion annually perform most efficiently when they tap into external financing for planned growth initiatives and to cover expected cash flow gaps.

PYMNTS Intelligence surveyed the opinions and practices of nearly 900 chief financial officers and treasurers operating in 23 countries and five sectors, including agriculture, healthcare, fleet and mobility, marketplaces and commercial travel.

Regression analysis was used to identify the key performance indicators tied to strong operating efficiencies. Based on how well a firm combined these characteristics, they were assigned a score ranging from 0 to 100. A higher score reflected better performance along some key cash flow cycle metrics.

How the Rankings Were Determined

Rankings were governed by operating efficiencies and the plans executives made to use working capital solutions to maintain or improve those operating efficiencies, measured in reduced days payable outstanding. DPO, as it’s commonly known, reflects a firm’s ability to pay suppliers and settle its debts.

Beyond the strategic nature of efficient working capital management, top performers have more suppliers integrated into their payment systems, reducing delays and errors. They are also more likely to pay their suppliers earlier, which leads to discounts and improved buyer-supplier relationships.

The intent to use working capital over the near term is universal. The data showed that 92% of the CFOs surveyed planned to access external working capital in the next 12 months.

Late last month, Visa also debuted an interactive tool that drives a five-minute benchmarking exercise. The benchmarking distills the findings noted above to produce a tailored report for executives as they seek insight and strategy surrounding their own working capital management practices. The Middle Market Growth Corporates Interactive Report and Benchmarking Calculator is available at the Visa Knowledge Hub.