Case Study 1
A leading manufacturing and trading company operating in the automotive industry with a presence across Europe, North America, and China. The company offers automotive lighting, plastic moulded parts, electrical components, forgings and the engine valve business. Styles Code
Being a high-growth company, it historically has been in low debt due to the healthy working capital cycle - primarily driven by favourable terms negotiated with its suppliers (80 days) and robust inventory and receivables management. This, in turn, led to unutilised bank lines and created a negative working capital cycle resulting in limited utilisation of working capital limits availed from banks over the years.
Low borrowings coupled with stable profitability levels over the last three years helped the company build up adequate cash surplus to the tune of a few hundred crores, currently being held in the short term fixed deposits (3-month maturity) with their primary bankers. The cash surplus invested was at low returns ~4.8% and long payable days to suppliers.
Upon contacting KredX, we observed that the company currently holds cash and cash equivalents in the balance sheet to the tune of a few hundred crores. A significant portion of which was invested in short-term bank deposits. On the other hand, the company's suppliers were receiving their payment in 80 days on average. Considering the strong cash position and extended payment period to vendors, the Capvel Dynamic Discounting module helped them achieve higher yields to the tune of 14-16%.
The Capvel AP module helped automate the manual tasks and invoice processing workflow, thereby reducing manual efforts and enabling 30% faster invoice processing, thus creating more opportunities for dynamic discounting.