Credit insurance gains focus amidst liquidity crunch

Japan reduced its days receivable to 42 days, best in the region.

There has been a rise in days receivable, with businesses across the region taking longer to convert working capital into cash. On average, Asia Pacific companies ended 2023 with 71 days receivable, marking a slight increase from the previous year, Aon’s 2024 Working Capital and Performance Benchmarking Report for Asia Pacific showed.

Aon's report underscores the importance of optimising working capital management through strategies like credit insurance, particularly during uncertain economic conditions. By securing protection against non-payment, businesses can enhance liquidity, protect revenue growth, and improve their financing options.

This trend indicates slower customer payments, leading to reduced working capital availability and liquidity challenges for businesses.

Japan saw an improvement, reducing its days receivable to 42 days, the best performance in the region. Conversely, companies in Hong Kong (65 days), Thailand (64 days), and India (100 days) experienced significant increases in days receivable, with Indian firms falling furthest behind the regional average.

The study also emphasises benchmarking against industry peers to identify areas for improvement. 

For instance, despite Japan leading overall, its electrical products sector lags by 27 days compared to Korean competitors. This highlights the strategic importance of targeted working capital management to reduce debt levels and enhance free cash flow.