Medical Technology Analysts continue to look at trade working capital position (TWCAP) as an indicator of strength. Accenture’s research showed that all med-tech companies surveyed could free considerable cash flow by optimizing their TWCAP. As an industry, med-tech companies are operating with over three months revenue trapped on their balance sheets, amounting to billions of dollars.
Although medical device and technology is a sector where TWCAP tends to be high, companies still have considerable room to improve their TWCAP positions. For example, let’s consider the biopharmaceutical industry (which was operating with an average TWCAP position 19 days better than that of the med-tech industry) – they have made focused efforts and have had significant successes in improving the TWCAP position. Is this something the medical technology industry can look to replicate?
To optimize TWCAP, medical technology companies must turn to value-adding finance operations that deliver the enduring benefits of lower costs, streamlined processes and higher service levels. The capability will grow in importance as health system reforms are revealed and public health care cost take out initiatives add pressure.