Skip to content
American ExpressAmerican ExpressAmerican ExpressAmerican ExpressAmerican Express
  • Personal Accounts

    • Account Summary
    • View Statement
    • Manage Account
    • Make a Payment
    • Manage Pre-Authorized Payment
    • Add Someone to Your Account

    Business Accounts

    • Business Account Summary
    • American Express @Work
    • Merchant Services

    Online Services

    • Register for Online Services
    • Activate Your Card
    • American Express App
    • Manage Account Alerts
    • Sign Up for Email Offers
    • Online-Only Statements

    Other Services

    • American Express Gift Cards
    • Support 24/7
    • Welcome Centre
    CanadaChange Country
    English
    • Français
  • Personal Cards

    • View All Cards
    • Credit Cards
    • Why American Express?

    Small Business Cards

    • View Business Cards
    • Interested in a Card?
    • Refer a Business Owner

    Corporate Cards

    • Corporate Cards
    • Supplier Payment Solutions

    Quick Links

    • Travel Cards
    • Cash Back Credit Cards
    • Platinum Cards
    • AIR MILES®* Credit Cards
    • Aeroplan®* Rewards Cards
    CanadaChange Country
    English
    • Français
  • Online Travel

    • Book Travel Online
    • Book Fine Hotels & Resorts
    • Book The Hotel Collection
    • Travel Support

    Business Travel

    • Global Business Travel Solutions
    • Meetings & Events

    Other Travel Services

    • Travelers Cheques
    CanadaChange Country
    English
    • Français
  • Travel

    • Travel Insurance
    • Air Trip Insurance

    Personal

    • Account Protector Ultimate
    • Identity Defence

    Other

    • Review Your Coverage
    • Submit an Online Claim
    CanadaChange Country
    English
    • Français
  • Membership Rewards® Program

    • Explore Membership Rewards
    • Redeem Points
    • Fixed Points Travel Program
    • About Membership Rewards

    Other Reward Programs

    • AIR MILES®* Credit Cards
    • Aeroplan®* Rewards Cards

    American Express Invites®

    • Front Of The Line®, Entertainment, Shopping & Dining Offers
    • Sign Up for Entertainment e-Updates

    Refer a Friend

    • Refer a Friend. Get Rewarded
    CanadaChange Country
    English
    • Français
  • Merchants

    • Merchant Services
    • Accept the Card
    • Manage Merchant Account
    • Contact Us
    • FAQs

    Corporations

    • Corporate Cards
    • Supplier Payment Solutions
    • Cardmember Resources
    • Program Administrator Resources
    • Global Business Travel Solutions

    Small Business

    • Small Business Solutions
    • View all Cards
    • Business Trends & Insights

    Global Network

    • Home
    • Issuers
    • Acquirers
    • Service Providers
    • Developers
    CanadaChange Country
    English
    • Français
  • Contact Us
  • Login
      • Account Summary
      • View Statement
      • Manage Account
      • Make a Payment
      • Manage Pre-Authorized Payment
      • Add Someone to Your Account
      • Business Account Summary
      • American Express @Work
      • Merchant Services
      • Register for Online Services
      • Activate Your Card
      • American Express App
      • Manage Account Alerts
      • Sign Up for Email Offers
      • Online-Only Statements
      • American Express Gift Cards
      • Support 24/7
      • Welcome Centre
      • View All Cards
      • Credit Cards
      • Why American Express?
      • View Business Cards
      • Interested in a Card?
      • Refer a Business Owner
      • Corporate Cards
      • Supplier Payment Solutions
      • Travel Cards
      • Cash Back Credit Cards
      • Platinum Cards
      • AIR MILES®* Credit Cards
      • Aeroplan®* Rewards Cards
      • Book Travel Online
      • Book Fine Hotels & Resorts
      • Book The Hotel Collection
      • Travel Support
      • Global Business Travel Solutions
      • Meetings & Events
      • Travelers Cheques
      • Travel Insurance
      • Air Trip Insurance
      • Account Protector Ultimate
      • Identity Defence
      • Review Your Coverage
      • Submit an Online Claim
      • Explore Membership Rewards
      • Redeem Points
      • Fixed Points Travel Program
      • About Membership Rewards
      • AIR MILES®* Credit Cards
      • Aeroplan®* Rewards Cards
      • Front Of The Line®, Entertainment, Shopping & Dining Offers
      • Sign Up for Entertainment e-Updates
      • Refer a Friend. Get Rewarded
      • Merchant Services
      • Accept the Card
      • Manage Merchant Account
      • Contact Us
      • FAQs
      • Corporate Cards
      • Supplier Payment Solutions
      • Cardmember Resources
      • Program Administrator Resources
      • Global Business Travel Solutions
      • Small Business Solutions
      • View all Cards
      • Business Trends & Insights
      • Home
      • Issuers
      • Acquirers
      • Service Providers
      • Developers
  • Contact Us
CanadaChange Country
English
  • Français
  • Personal Accounts

    • Account Summary
    • View Statement
    • Manage Account
    • Make a Payment
    • Manage Pre-Authorized Payment
    • Add Someone to Your Account

    Business Accounts

    • Business Account Summary
    • American Express @Work
    • Merchant Services

    Online Services

    • Register for Online Services
    • Activate Your Card
    • American Express App
    • Manage Account Alerts
    • Sign Up for Email Offers
    • Online-Only Statements

    Other Services

    • American Express Gift Cards
    • Support 24/7
    • Welcome Centre
  • Personal Cards

    • View All Cards
    • Credit Cards
    • Why American Express?

    Small Business Cards

    • View Business Cards
    • Interested in a Card?
    • Refer a Business Owner

    Corporate Cards

    • Corporate Cards
    • Supplier Payment Solutions

    Quick Links

    • Travel Cards
    • Cash Back Credit Cards
    • Platinum Cards
    • AIR MILES®* Credit Cards
    • Aeroplan®* Rewards Cards
  • Online Travel

    • Book Travel Online
    • Book Fine Hotels & Resorts
    • Book The Hotel Collection
    • Travel Support

    Business Travel

    • Global Business Travel Solutions
    • Meetings & Events

    Other Travel Services

    • Travelers Cheques
  • Travel

    • Travel Insurance
    • Air Trip Insurance

    Personal

    • Account Protector Ultimate
    • Identity Defence

    Other

    • Review Your Coverage
    • Submit an Online Claim
  • Membership Rewards® Program

    • Explore Membership Rewards
    • Redeem Points
    • Fixed Points Travel Program
    • About Membership Rewards

    Other Reward Programs

    • AIR MILES®* Credit Cards
    • Aeroplan®* Rewards Cards

    American Express Invites®

    • Front Of The Line®, Entertainment, Shopping & Dining Offers
    • Sign Up for Entertainment e-Updates

    Refer a Friend

    • Refer a Friend. Get Rewarded
  • Merchants

    • Merchant Services
    • Accept the Card
    • Manage Merchant Account
    • Contact Us
    • FAQs

    Corporations

    • Corporate Cards
    • Supplier Payment Solutions
    • Cardmember Resources
    • Program Administrator Resources
    • Global Business Travel Solutions

    Small Business

    • Small Business Solutions
    • View all Cards
    • Business Trends & Insights

    Global Network

    • Home
    • Issuers
    • Acquirers
    • Service Providers
    • Developers

CanadaChange Country
English
  • Français
Skip to content
DON'T do business WITHOUT IT
DON'T do business WITHOUT IT

Business Cards

Small to Medium

  • American Express® Business Gold Rewards Card

  • Business Platinum Card® from American Express

  • Marriott Bonvoy™ Business American Express® Card

  • American Express® AIR MILES® for Business Card

  • American Express® AIR MILES® Gold Business Card

  • American Express Business Edge™ Card

  • View all Business Cards

Large/Corporate

  • American Express® Corporate Card

  • American Express® Corporate Gold Card

  • Corporate Platinum Card® from American Express

  • American Express® AeroplanPlus®* Corporate Card

  • American Express® AeroplanPlus®* Corporate Platinum Card

  • View All Corporate Cards

Supplier Payment Solutions

  • American Express vPayment

  • American Express Corporate Purchasing Card

  • American Express Business Travel Account

  • American Express Buyer Initiated Payments

  • American Express Corporate Meeting Card

  • View all

Business Class

Business Class

Insights and Inspiration to Help Grow Your Business

Managing Money

  • Cash Flow

  • Financing

Creating Efficiencies

  • Suppliers

  • Inventory Management

  • Productivity

  • Automation

Planning for Growth

  • Strategy

  • People

  • Business Expansion

  • Risks and Controls

  • Innovation

Industry Thought Leadership

  • Industry Insights

  • Oil & Gas

  • Construction

  • Thought Leadership

Request Info

  • Trends and Insights
  • Managing Money
  • Cash Flow
Business Class

September 16, 2019

Is Your Working Capital Hardly Working?

Is Your Working Capital Hardly Working?

Twitter Icon
Facebook Icon
LinkedIn Icon
American Express

Summary

By shortening the cash conversion cycle, the number of days cash is tied-up in working capital to run daily operations, companies can put their working capital to work for other purposes.

Twitter Icon
Facebook Icon
LinkedIn Icon

When interest is practically free, your company might be able to afford to leverage debt as a tool. But as interest rates rise, or your need for capital to grow your business increases, your company's need for low cost cash can increase, too. The secret that smart businesses already know is that the opportunity cost of leaving money in the balance sheet is too high and best-in-class organizations are always ensuring they optimize working capital management and leave no cash hidden.

Companies that have been spoiled by low interest rates can end up leaving heaps of cash on the table. According to The Hackett Group1, a strategic consultancy that conducts benchmarking studies for corporations globally, U.S. companies leave about $1 trillion in working capital uninvested. A global study by PwC Global2 pegs that number at more than $1.4 trillion USD, or $1.8 trillion CDN.

That's where working capital management comes in. By shortening the cash conversion cycle, the number of days cash is tied-up in working capital to run daily operations, companies can put their working capital to work for other purposes — namely, freeing up cash to fuel growth.

That strategy doesn't kick in overnight, though, says Veronica Wills, The Hackett Group's associate principal and North American working capital practice lead.

“Working capital management really is a culture you build in your company. It's a learned skill, not something people just naturally know how to do," she says. “It has to be embedded in every single functional process that contributes to working capital, which are many."

Stretching Out Terms

Leveraging extended Days Payable Outstanding (DPO) is one of those processes, and financial instruments such as corporate credit cards play a significant part giving companies more time to pay suppliers.

“A lot more companies are leveraging that as a tool in their overall supplier payment strategy," Wills says.

American Express unsecured credit can help companies take that strategy one step further. It allows companies to access an alternative source of funding beyond their traditional bank relationships. By using American Express payment solutions companies can get access to a grace period of up to 55 days interest-free, while improving relationships with their suppliers by using Amex funds to pay them right away. Businesses can then extend their DPO by paying off their Amex corporate card or other payment solution much later, effectively holding on to their money longer.

For example, the business could use American Express unsecured credit to pay a supplier on day 30, instead of pushing the payment out to 90 days or longer. The company would be able to realize their extended DPO goals while still keeping their supplier happier.

The payment terms you negotiate with suppliers can be the biggest driver of DPO. Wills suggests negotiating terms with your large and midsize suppliers, which might comprise only a quarter of your supplier base.

Smaller suppliers — the “tail" of your base — might only contribute about 5 percent of your spend, but could account for the remaining three-fourths of the suppliers you deal with. They're also more likely to resist extended terms.

By carefully managing this tail spend, companies can realize savings of 10 to 20 percent, while increasing their strategically-managed spend — the spend from the larger and midsize suppliers — by 86 percent or more3.

For that group of suppliers, Wills says it makes the most sense to use a corporate purchasing card so you can take advantage of those extra days.

“You don't have to go through the noise of trying to negotiate terms with tiny suppliers that in aggregate aren't going to influence your DPO number that much anyway, even if you are successful."

American Express is uniquely structured to onboard vendors to accept B2B payments. Amex operates as a closed loop being an issuer of payment products such as corporate cards and also operating the network where transactions take place.  Because of this structure American Express has direct relationships with merchants and is able to facilitate conversations about the mutual benefits possible when accepting B2B payments.

Faster Payments

Another way companies can optimize their working capital is by accepting virtual payments, such as card and card-less payments, from their customers.

It can take five to seven days to receive and process a cheque, once the supplier has sent it which can take much longer, versus one or two days to accept an electronic payment. Plus, businesses opting for manual payments would need to consider the costs involved with writing and printing paper cheques, postage costs as well as the significant time employees are spending on the task.

“Manual payments are very expensive," Wills says. “Being able to electronify that process has a huge efficiency savings associated with it as well as improving the float."

Keeping Pace with Growth

If you're managing a small or mid-size company, working capital management techniques could serve the greatest benefit to an organization of your size. Since there is plenty of room to grow and mature, their working capital needs can increase significantly.

According to Wills, it's important for such companies to manage their working capital efficiently so their needs don't outpace the organization's growth.

“Efficient management of working capital needs to be embedded at every step of the way," Wills says. “If you take your eye off working capital, it can take a really long time to get back to the place where everybody is focusing on managing it."

 

1https://www.thehackettgroup.com/insights/

2https://www.pwc.com/gx/en/services/advisory/deals/business-recovery-restructuring/working-capital-opportunity.html

3https://www.accenture.com/t20150523T051950w/us-en/acnmedia/Accenture/Conversion-Assets/DotCom/Documents/Global/PDF/Strategy2/Accenture-Getting-Grip-Tail-Spend.pdf (was accessed on September 1, 2019)

 

 

This article is intended for general informational purposes only and does not constitute legal advice or an opinion on any issue. It should not be regarded as comprehensive or a substitute for professional advice.

Twitter Icon
Facebook Icon
LinkedIn Icon
Want to Dig Deeper?

American Express Cards

  • Personal Cards
  • Credit Cards
  • Small Business Cards
  • Corporate Cards
  • American Express Gift Cards
  • Add Someone to Your Account

More Products & Services

  • Membership Rewards® Program
  • American Express App
  • Insurance Home
  • Book Travel Online
  • Merchant Services
  • Accept the Card

Important Links

  • Form & Document Centre
  • Online Services
  • Global Assist
  • Shop Confidently
  • See Merchants Near You
  • Refer a Friend

Company Information

  • About American Express
  • Careers
  • Contact Us
  • Sign Up for Email Offers
  • Frequently Asked Questions
  • Moving Abroad?
    • Personal Cards
    • Credit Cards
    • Small Business Cards
    • Corporate Cards
    • American Express Gift Cards
    • Add Someone to Your Account
    • Membership Rewards® Program
    • American Express App
    • Insurance Home
    • Book Travel Online
    • Merchant Services
    • Accept the Card
    • Form & Document Centre
    • Online Services
    • Global Assist
    • Shop Confidently
    • See Merchants Near You
    • Refer a Friend
    • About American Express
    • Careers
    • Contact Us
    • Sign Up for Email Offers
    • Frequently Asked Questions
    • Moving Abroad?

American Express
CanadaChange country
English
  • Français
  • Facebook
  • Connect with Amex on Instagram
  • Tweet your questions to @AskAmex
  • YouTube

  • Trademarks
  • Terms & Conditions of Use
  • Updated Online Privacy Statement (01/2018)
  • Complaint Handling
  • Codes of Conduct & Commitments
  • Amex Bank of Canada Prime Rate
  • Security Alerts
  • Accessibility Policy
  • Accessibility Plan
  • Cardmember Agreements

Amex Bank of Canada, P.O. Box 3204, Station F, Toronto, ON M1W 3W7

Copyright © 2021 American Express Company