Most Singapore businesses must improve cash management: Study
Half of Singapore's business sectors need to improve their cash management to free up an additional $8.7 billion of liquidity that is tied up, according to a new study.
It found that the drag in performance was due to a rise in the time taken to collect cash from sales and a growth in inventory.
This was partially offset by a rise in the time to pay creditors - a stance that might not be sustainable in the long term.
The study by PwC Singapore and Spring Singapore, which was released yesterday, looked at more than 1,000 public and private companies across 15 industries. Seven of the industries managed to improve their net working capital days over last year, two barely maintained their performance while six saw a fall in net working capital days.
The metric measures how long it takes a company to convert working capital into revenue. The more days it takes, the longer a business is tying up funds without earning a return.
Eight out of 15 sectors have either seen their performance in this regard deteriorate or show signs that they are struggling to maintain their performance compared with last year.
The study identified some sectors that struggled more. These include energy and chemicals, which suffered a revenue loss of 25 per cent year-on-year while struggling to manage receivables (and inventory).
But the study said some larger players have helped improve the sector's performance by raising the amount of time to pay creditors. This positively impacts net working capital days.