The growing liquidity crunch in the Asia-Pacific region has prompted a renewed focus on credit insurance as businesses struggle to manage their working capital effectively. According to Aon’s 2024 Working Capital and Performance Benchmarking Report, companies in the Asia-Pacific region reported an average of 71 days receivable at the end of 2023, a slight increase from the previous year.
The report highlights a concerning trend of extended customer payment times, which has resulted in diminished working capital and liquidity challenges for businesses. Amid these economic uncertainties, the importance of optimizing working capital management strategies, including credit insurance, has become increasingly evident. Credit insurance allows businesses to protect themselves against non-payment, thereby enhancing liquidity, safeguarding revenue growth, and improving financing options.
Notably, Japan has emerged as a leader in working capital management, successfully reducing its days receivable to just 42 days, the lowest in the region. In contrast, firms in Hong Kong and Thailand reported receivables of 65 and 64 days, respectively, while Indian companies lagged significantly with an average of 100 days, underscoring the difficulties faced in converting working capital into cash.
The study emphasizes the importance of benchmarking against industry peers to identify improvement opportunities. While Japan leads the region overall, its electrical products sector still trails Korean competitors by 27 days in days receivable. This disparity illustrates the critical need for targeted working capital management strategies to reduce debt levels and enhance free cash flow.
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