Comment: Arise, chief of business continuity

In any organisation, the ability to keep cash flowing starts with the finance function. And a balance of short and long-term planning can greatly impact how your company manages and emerges on the other side of uncertain economic times.

With this in mind, finance functions must be empowered and supported to lead the charge toward a more confident future.

It’s time for finance to step up

 Now more than ever, finance teams have a chance to make a substantial impact on the overall success of their company’s stability and sustainability as they mitigate the pandemic.

But, while finance departments have already come a long way in proving their value to other business units, the need to step out and lead during times of crisis is imperative. In fact, the priorities of the entire organisation should now be closely aligned with those of the chief financial officer.

As an article released earlier this year by leading consultancy Bain & Company notes: “COVID-19 will demand not only that finance teams devote more time to value-added activities, but also that traditional activities, such as receivables and payables, run more efficiently and effectively, through remote collaboration and other new ways of working.”

In other words, there has never been a better time for finance to start driving overall strategy.

 Just reacting isn’t enough

Reacting to and reporting on current events to your business is no longer enough. Finance departments need to become more vocal to ensure that the business understands the financial impacts of what is taking place, and to provide forecasts and financial models based on what they think the future holds.

Key examples here (especially in the current climate) might include predicting the potential loss of a key customer by spotting spend-reduction trends, or the loss of a vital supplier by noting changes in their invoicing schedule. Without clear communication between business units, the severity of any impact may take time to be fully understood, potentially leading to changes being made too late, and to questions about commercial preparedness.

Here are a few areas of focus to empower such a shift in leadership:

Encourage the business to emphasise cash flow

Carefully monitor and control all spend flowing both into, and out of, the business.

Accelerate receivables – reduce late payments, shorten credit terms, and ensure error-free invoicing.

Extend payables where possible and appropriate; through better credit terms for instance.

Keep a close eye on inventory – lower pooling and forecasting, reduce safety stocks, focus on Stock Keeping Unit optimization.

Recognise your critical suppliers

This may be a good time to foster closer relationships with them – consider accelerating their payment terms to keep them delivering.

Analyze your company data and get foresight from hindsight

A wealth of financial data is likely already available within the organisation – apply close and regular analysis and spot good and bad trends early.

Define what metrics really matter through these challenging times

New orders, weekly financial performance, on-time or late payments, and late deliveries for example.

Be consistent

Once you have begun supporting smarter business decisions, don’t stop. Maintain your drive and visibility.

A company’s confidence and ultimately, its resilience, can be demonstrated through a visible continuity in its production/operations (even if at a reduced rate); by setting realistic expectations, providing regular updates on cash flow management, and through offering clear contingencies if and when targets are not met.

Seize this opportunity

For all its disruption, the pandemic also presents some unique opportunities. To evaluate where process redesign or simplification might improve your organisation, for example. And one sure method of improving efficiencies and reducing high-volume, time-intensive tasks in this way is through accounts payable (AP) automation.

AP automation empowers you to:
– Analyse valuable spend and supplier data
– Generate operational efficiencies and savings
– Claim quick wins that produce momentum for a broader P2P project
– Develop a cycle of continuous improvement that delivers ROI

Moreover, if you’re still relying on paper invoices while your teams are working remotely, you’re probably seeing major disruptions in fulfilling your payment obligations to suppliers.

In addition to slow payment cycles, gaining visibility of what’s been paid, what’s due, and what’s upcoming, will be a slow, painful process if done manually. By receiving invoices electronically (or e-invoicing) you – and the wider organisation – will benefit from full visibility over the business’s financial data and liquidity status – resulting in improved agility in today’s constantly-changing economic environment.

AP Automation simplifies processes, provides clear visibility, and further develops in-depth analytics and cash flow optimisation.

It’s the first step towards what we at Basware call Visible Commerce. And an important one.

Sami Peltonen is the VP of purchase to pay product management at Basware

To dig deeper into how AP Automation can empower you to keep your organisation moving in tumultuous times, go to: https://r.basware.com/makeyourcashflow

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