Average days receivable increased for most sectors compared to the previous year
Singapore, October 3, 2024 – Aon plc (NYSE: AON), a leading global professional services firm, has released its 2024 Working Capital and Performance Benchmarking Report for Asia Pacific. The comprehensive study analyses the working capital performance and practices of over 900 companies across 21 industries and 12 countries/territories within the region.
The report highlights that, for the year ending 2023, the average days receivable for companies in the Asia Pacific region stood at 71 days. While this marks a modest increase from the previous year, the rise in days receivable suggests a reduction in working capital availability, indicating that businesses are experiencing slower cash collection from their customers.
The study also uncovers considerable discrepancies in days receivable across different industries and countries/territories, underscoring the importance of region-specific and sector-specific approaches. Notably, companies in Japan demonstrated a five-day reduction in their days receivable, now standing at 42 days, making them the regional leaders in this area. In contrast, Hong Kong saw an increase to 65 days (+3.6), Thailand to 64 days (+2.6), and India to 100 days (+2.7). While both Hong Kong and Thailand remain below the regional average of 71 days, India’s further increase to 100 days highlights a significant opportunity for Indian corporations to enhance their working capital management.
Steve Taylor, Head of Credit Solutions for Aon in Asia, commented, “Working capital is critical for any business, especially during periods of uncertainty and volatility. When businesses take longer to convert working capital into cash, it can have a direct impact on their liquidity and profitability. Identifying areas for improvement in working capital management is essential, and strategies such as using credit insurance to safeguard against non-payment risks can support revenue growth and secure financing. By leveraging data-driven insights, companies can make informed decisions to optimise working capital and unlock considerable value for their businesses.”
The report stresses the importance of benchmarking against industry peers to pinpoint potential areas for enhancing the working capital cycle. Japanese companies, for instance, are leading the region in terms of days receivable across all sectors, yet in the electrical products sector, they lag behind the industry average, taking 27 days longer to collect payments compared to their Korean competitors.
Best-in-class companies, according to the report, can use efficiencies in working capital to generate free cash flow and reduce debt levels, showcasing the strategic significance of effective working capital management.
Ankit Tambe, Regional Director for Credit Solutions in Asia at Aon, added, “Benchmarking a company’s days receivable against its competitors is a key step in assessing financial health and evaluating working capital performance. By reviewing credit strategies to shorten the cash conversion cycle and release trapped capital, businesses can foster greater value creation and promote sustainable growth.”
