As businesses across the Asia Pacific region grapple with prolonged cash conversion cycles, credit insurance is gaining renewed attention as a critical tool for managing working capital. A recent report by Aon reveals that companies in the region concluded 2023 with an average days receivable of 71 days, a slight increase from the previous year, indicating a growing trend of delayed customer payments.
Notably, Japan has achieved a commendable reduction in days receivable, now standing at 42 days—the best performance in the region. In stark contrast, companies in Hong Kong, Thailand, and India have faced significant increases in days receivable, with Hong Kong at 65 days, Thailand at 64 days, and India lagging at 100 days. This disparity underscores the liquidity challenges many businesses are currently facing.
Aon’s 2024 Working Capital and Performance Benchmarking Report emphasizes the necessity of optimizing working capital management, particularly during periods of economic uncertainty. By utilizing credit insurance, businesses can safeguard against non-payment risks, thereby bolstering liquidity, protecting revenue growth, and enhancing financing opportunities.
The report further highlights the importance of benchmarking against industry peers to identify areas for improvement. While Japan leads the region overall, its electrical products sector is notably trailing by 27 days behind its Korean counterparts, illustrating the need for strategic working capital management to reduce debt levels and improve free cash flow.
As companies navigate these liquidity challenges, the focus on effective working capital strategies and credit insurance is likely to intensify, ensuring businesses can maintain stability and growth in an unpredictable economic landscape.
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