Hackett Survey

Companies Slow Payments to Suppliers in 2019 As Cash & Debt Continue to Rise - Seite 2

“But for the first time since the great recession more than 10 years ago, the fallout from the global pandemic has changed this picture dramatically in 2020. For most companies, there’s suddenly a ‘burning platform,’ a sense of urgency that is driving improvement. Companies are making liquidity and cash flow a top priority,” said Bailey. “CFOs are focused on cash visibility on a daily basis and have made daily reports on the company’s cash position a requirement as they try to drive cross-functional working capital improvement efforts. They’re implementing digital transformation capabilities such as robotic process automation to automate collections and payables. They’re improving forecasting through increased scenario modeling and integrated business planning capabilities. And they are truly seeking to optimize and standardize how they collect from customers, pay suppliers, and manage inventory.”

According to The Hackett Group Senior Director Gerhard Urbasch, “It’s a challenging effort, and companies must balance cash, cost, and service elements to succeed. CFOs must help other parts of their organization understand the importance of working capital and incentivize sales, procurement, manufacturing and other parts of the organization to make the right choices. In addition, they must consider the external impact of their actions, and in some cases make decisions designed to help customers and suppliers that may have more serious liquidity issues of their own.”

The Hackett Group’s experts identified an array of approaches companies can take to drive working capital improvement, including:

Use Disruption to Drive Change – Take advantage of the opportunity presented by the current liquidity challenges to assess, reprioritize, and make changes. Examine legacy processes to identify where improvements can generate quick wins.

Improve Visibility – Ensure that the right key performance indicators are available for various business leaders, so that they can be used to drive action plans. Provide leaders with a real-time, intelligent dashboards that equip them with the insight they need.

Look Inhouse First – Before making changes to terms with suppliers and customers, look for quick win opportunities within the company, areas where process improvements can improve cash position. Promote a cash culture across the organization, and provide incentives for sales, procurement, commercial teams and others to optimize for cash. On receivables, make sure staff are not trading terms for revenue, remove obstacles to payment such as misbilling, and put clear escalation processes in place, up to and including having senior finance leaders call on overdue bills. Companies can also monitor customer payment performance, assess credit risk, and reprioritize activities by value. On payables, ensure that controls are in place to avoid early payments. Prepare for further disruptions, including an anticipated second wave of COVID-19. On inventory, encourage staff to consider cash impact when making decisions, collaborate cross-functionally to determine the organization’s appetite for risk and potential disruption, and develop effective contingency plans.