WHAT TO DO RIGHT NOW AS CFO? The current situation has made most CFOs look for ways to optimise current terms with customers and vendors. Conventionally, the CFO has three main tools in the toolbox for optimising net working capital. These three tools are of course: HOUSEKEEPING – for when an internal process does not conform to a policy or outlined procedures (e.g. early payment, system terms maintenance). The housekeeping relates to what has already been agreed and typically only affects internal stakeholders. PROCESS OPTIMISATION – for when a current process needs to be altered/re-engineered to ensure an improvement can be achieved (e.g. inventory forecast maintenance, payment run frequency). This part of the CFO toolbox relates to process optimisation and can both be internal and external but will often impact external stakeholders. POLICY/TERMS – for receivables and payables, a move to a standard/target payment term based on local market characteristics. Working with the company’s payment policies and terms will inherently (almost) always be externally driven. But that was then. What about now? What should you do as CFO right now and in the future to help your company through this highly volatile, economic climate? We see that stakeholders in the same industries are willing to help each other, for example by paying invoices which are not yet due. The purpose is to ensure that the entire value chain stays strong so that the steady supply of goods is safeguarded. In other words, a first step in this respect is of course terms. But your options for stabilising your business are not limited to your payment terms and policies. Normally, the tools housekeeping and process optimisation represent up till 80-90% of your cash optimisation potential. So how can you speed up and release some of that potential now? At the end of the day, there are two ways to quickly identify short-term potential: 1 Group your main stakeholders in three main processes (Order to Cash, Procure to Pay, Forecast to Fulfi) and go through all sub-processes in each process. Experience shows that good ideas will come up immediately, and some of these are likely to be ready for immediate implementation It is important to discuss: • How is the process today – high level? • How many stakeholders are involved in the process (Can we reduce the number of people involved in the process? How can we minimise the number of change of hands?) • How long is the lead/process time (can we reduce the lead/process time? Are all steps necessary?)
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