Magazine 03: Frank H. Lutz on the topic of working capital optimisation
“Interest in working capital is still on the rise”
Many companies are apprehensive about optimizing their working capital. This is where financial service provider marketplace CRX Markets can help. CEO Frank H. Lutz discusses why working capital has become such an important topic and which sectors can take advantage of it.
What does CRX Markets actually offer, Mr. Lutz?
We are a platform that facilitates working capital solutions. We work with companies looking for these solutions and banks offering financing. We receive a commission for our service, which depends on the amount financed. It is a very attractive proposition for companies, as they can see more quickly which provider provides the best conditions and can therefore reduce their administrative burden.
Companies understandably appreciate the improved transparency. But were banks critical of this at first?
Yes, of course. They were rather skeptical at the start. What helped, though, was that we were soon able to get some major customers on board. These acted as pioneers for us, as they told their banks that they would only be able to conduct their business through our platform in future.
Since then, however, most banks have realized that they have to remain flexible in order to be fit for the future and also be open to new concepts such as our platform. We also offer added value, opening a door for many banks that previously had nothing to do with working capital financing. They can now move into new business areas, all thanks to us.
What kind of financing solutions do you offer specifically?
We offer an all-inclusive package that takes care of everything, with solutions for both the asset and liability sides of the balance sheet. A major area for us is factoring: both classic and reverse factoring, with third-party financing. There are also offers based on discounts, such as dynamic discounting in which customers leverage their own solvency on our marketplace.
Is it worthwhile?
Absolutely. Interest in optimizing working capital is constantly on the rise. It has slipped under many companies’ radars until now. I honestly don’t know why it has taken them so long to become interested. But admittedly, when I was a CFO at other leading companies, it was always a side-issue.
Why are so many companies suddenly showing interest in this area?
Working capital financing frees up assets for use in other investments. In other words, in order to remain competitive, companies have to drive forward innovations that typically involve large investments. There is hardly any sector where this would not be relevant. The automotive industry is switching to new types of drive, the chemical industry is changing, and food manufacturers are increasingly focusing on sustainability and fair working conditions. There is also a lot going on in retail as well, such as supermarkets having to work with new delivery methods.
Is working capital optimization particularly suitable for industries undergoing transformation?
Yes and no. It certainly does help those types of sectors, but even in more stable sectors, working capital optimization is a responsible form of risk management. When I was CFO at MAN during the financial crisis, our bank told us one day that it was no longer able to carry out any transactions. We had to write the checks out for our suppliers ourselves. The only reason we could do this was because we had the funds we needed, and our capital was not tied up elsewhere. Maybe we didn’t called it working capital financing back then, but it was what saved us.
Is crisis management the sole driver behind this?
Not at all. Corporate social responsibility also comes into it. We often view working capital purely through a financial lens. But you can also set other standards, such as fair working conditions with suppliers.
How can working capital financing help there?
As a customer, you could choose to offer your suppliers more attractive financing terms if their production methods are fairer, as we are seeing in the fashion industry.
Are there sectors you can see that are lagging behind?
I wouldn’t call it lagging behind, but there are of course areas where working capital is not that important. Government agencies are one example, but there has also been little interest in the health sector thus far.
So, there is good growth potential for CRX Markets?
Our growth does not just depend on gaining more and more customers. We also look at whether it is worth expanding our product portfolio. We built the platform as a marketplace, and now, in principle, we can offer almost anything through it. But of course, we always look at which products actually suit us.
More topics in the magazine issue:
- Supply Chain Finance – Win Win Win!
- The Future of Procurement: Procurement Transformation
- Raw materials study – Economic slump expected
- Interview – Economic policy developments in China