Ardent Partners takes the severity of the COVID-19 pandemic with the utmost seriousness. Please click here to read our approach in these uncertain times.
From March 31 through May 7, Ardent Partners will host The CPO Rising 2K20 – The Resiliency Imperative, an exciting new online series that focuses on the key strategies that procurement, supply chain, finance, and HR leaders will need to get through this period of adversity.
This series is comprised of web-based presentations, panels, and interviews with leading business executives, industry analysts, and other experts, as well as Ardent’s latest research on resiliency, agility, and the State of Procurement. Live sessions will run from March 31 through May 7 when the Virtual Summit is held. Recordings of each session will be available on the event site. Be sure to check back frequently as exciting new sessions will be added to the schedule.
The Resiliency Imperative – Cash Becomes King (Again)
We are at the beginning stages of an unprecedented crisis: a global health crisis that has ignited a global economic crisis. The future is unpredictable, we get it. All the more reason for business leaders to manage their company’s cash in a strategic manner with an eye for the post-Covid business world.
From hard coinage to electronic funds, cash has been the basic building block of business success for centuries. Cash allows enterprises to pay employees, fulfill debt obligations, invest in new projects, and purchase (critical) goods and services. This indisputable truth has driven organizations large and small to emphasize the management of cash since the first businesses arose in ancient times. The modern era has complicated matters with a persistently low-interest-rate environment, forcing enterprises to seek out new cash management frontiers in order to maintain just the right amount of liquidity to survive in an increasingly competitive marketplace. And, as the world grapples with a global pandemic and an economic crisis of biblical proportions, cash has become king (again).
Cash management is as much an art as it is a science. The finance team must decide which financial tactics and vehicles to use as part of their overall cash management strategy, calculating the risks and benefits of each and determining what options are the “best fit” for the enterprise. In doing so, finance must develop forward-looking cash forecasts that anticipate future needs and market conditions while working to ensure that the business will have enough cash available to fund its short- and medium-term obligations. The shear volume of uncertainty in today’s global business environment is cause enough for finance to vigilantly perform its cash management duties during these times, and to keep the enterprise adequately prepared for what comes next. This is a difficult task that requires hedging against known and unknown risks – the “art” of cash management – which is further complicated by a sometimes volatile credit environment and persistently low rates of return on capital.
Where Accounts Payable Fits In
The Accounts Payable (AP) department has the potential to impact cash management and the financial performance of an enterprise, particularly at a time of heightened uncertainty. With cash management becoming such a prized source of value for contemporary enterprises, understanding the real-time impact of corporate liquidity allows the corporate executive team to understand the enterprise’s ultimate place and progress across a series of key financial and related goals. This connection between AP and cash management speaks to a collaborative effort that is years in the making: the treasury group is certainly augmented from a strong, interconnected relationship with the accounts payable function.
Today, the AP department should really be thought of as a hub of intelligence. Its importance is active and continuing to grow in magnitude. AP sits on a goldmine of information, including data held across thousands (or tens of thousands) of invoices and supplier payments. This data, when transformed into real, actionable intelligence, provides a fantastic link to internal stakeholders, external partners/suppliers, and key business executives like the Chief Financial Officer (CFO). “Cash is king,” the old adage goes, however, “cash intelligence” is even more critical in today’s increasingly globalized and interconnected world.
Forward-thinking enterprises have already recognized the central role that AP can play in managing enterprise cash more effectively and have begun utilizing advanced financial solutions like dynamic discounting and supply chain finance (“SCF”) to drive better results for the business. Dynamic discounting, which offers discounts on a sliding scale, allows for greater discount capture opportunities. It also allows buyers to capture more discounts and suppliers have the option to receive payments more quickly. SCF is an early-payment discount technique that utilizes third-party capital, normally from a financial institution or a bank, to pay an invoice early. In some instances, the early payment is made as soon as the invoice has been approved. SCF is an innovative way for enterprises to help their supply chains access credit and improve cash flow at a lower cost, which can serve as vital floats for companies that are struggling to stay above water at a time of great global calamity.
Final Thoughts
As companies face the dual crisis of a global pandemic and an economic recession, it is even more critical for AP and finance leaders to manage cash in a strategic manner. Having greater cash on hand can help businesses use their resources more strategically at a time when there is an enormous amount of uncertainty, but also opportunity, in the global market. Making the best of opportunities also means using your resources to the best of your abilities and in the smartest manner possible. Having more cash on hand can help businesses operate during the downturn and build hedges against an uncertain future.
CALENDAR OF SESSIONS:
Instead of our typical related research section, we are inviting our readers to investigate our new virtual series, CPO Rising 2K20 – The Resiliency Imperative. Click on the session titles below to learn more and register for them! (Note that there will be more titles coming soon).
- Welcome Address to The Resiliency Imperative – WATCH ON-DEMAND (no registration)
- WATCH ON-DEMAND – Prevent, Manage, Recover: Key Strategies to Execute a Business Continuity Plan **
- April 7 2:00 pm – 3:00 pm ET – Rethinking the Global Supply Chain
- April 9 11:00 am – 12:00 pm ET – Increased Technology Risks in the Age of COVID-19
- April 9 2:00 pm – 3:00 pm ET – Powering Spend Results with AP Tools/Data**
- April 13 11:00 am – 12:00 pm ET – 99.999%… Managing Critical Systems thru Periods of Uncertainty (Registration opening soon)
- April 14 11:00 am – 12:00 pm ET – What the Pandemic Means for Your Workforce
- April 15 2:00 pm – 3:00 pm ET – CPO Leadership in Times of Crisis
- April 21 2:00 pm – 3:00 pm ET – The Role of Sustainability in the Post-COVID-19 Supply Chain
- April 30 2:00 pm – 3:00 pm ET – CPO Rising: The State of Procurement in 2020
- May 7 11:00 am – 2:00 pm ET – The CPO Rising 2K20 Virtual Summit – The Resiliency Imperative – Registration Page**
** If you enjoyed today’s article, don’t miss these sessions.
