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5 Tips For Better Cash Flow Management

Daniel Newman

5 Tips For Better Cash Flow ManagementNo matter what industry you serve, your business can be fickle. Factors such as seasonality, dependence on government spending and the way the overall economy can influence spending can present unique challenges for businesses.

With so much volatility looming, your company is always at the risk of being faced with cash flow issues. While most of your companies probably have accounting department (even if it is you), it is important to recognize that cash flow is a different animal. With customers continuing to seek flexible terms and the nuance of accrual-based accounting, cash flow becomes even more unpredictable because an organization can be generating strong profits but somehow be operating with limited cash availability.

Unlike profitability, which is simply accounted for by revenue less cost of doing business, cash flow is dependent on the actual collection of receivables generated from the work that is being performed. Therefore, you can be showing a profit because you have invoiced for work being done, but you may not see the cash immediately. In fact, in some industries it isn’t uncommon for receivables to linger for 30, 60 or even more than 90 days.

It can be detrimental to your business when large chunks of receivables start aging. It can cost you interest, relationships with suppliers and problems with customers. And while the only genuine way to create more working capital is to continuously generate profit and keep the cash in the business, there are ways for businesses to be more strategic with cash flow:

Receivables Management: Most of your customers have a plethora of bills to pay. Many companies don’t have stringent policies for staying on top of receivables by sending reminders, making calls when they come due and building relationships with customer payable teams. If you aren’t calling and asking for payment, the customer may be thinking you don’t need the money that badly. I often play on a well known metaphor and say “The squeaky wheel collects the past due bill.”

Down Payments: At some point it seemed that asking for down payments became taboo. Probably at the point in which you could finance a house with no money down? Regardless, salespeople often feel that requesting money is a potential sticking point in getting the deal. The problem is that depending on your business, a project or final deliverable can take months. Progress billing can alleviate some of the strain, but if you source products from others it doesn’t account for the fact that most of your vendors want payment in 30 days. A substantial down payment that covers a good component of the “cost” of the equipment can allow for better management of cash flow throughout the job.

Credit Worthiness: There are so many tools for understanding customer credit worthiness. A lot of companies want or need the business so bad that they will overlook bad credit or not even check it. Make sure at the very least you know what you are getting into by using tools like Dun & Bradstreet Credibility to determine what type of pay to expect from a customer. I know that deep down you never want to say no to an opportunity, but sometimes the best business deals you do are the ones you don’t.

Credits, Rebates & Co-Op: While this isn’t available in every industry. In certain lines of business there are a lot of opportunities to earn credits, rebates and marketing dollars from your business partners. While applying for them and collecting the dollars isn’t always easy, it can be another source of cash (And profit). However,just like receivables management, this needs to be cared for so you don’t end up with tens or hundreds of thousands in rebates that aren’t claimed.

Borrow When You Don’t Need It: I know it sounds funny (and perhaps against some of your personal financial practices), but this is more of a statement of preparation for growing businesses. I often hear business owners saying, “I’m all cash-based and I don’t need any credit.” I think that is wonderful, and I hope that you can sustain that forever. But when you are running that way, it is a good time to work with a bank to set up a line of credit. What happens if you run into a huge opportunity that stretches beyond your resources? I call this a “just-in-case fund.” There is nothing wrong with running a cash business, but not being prepared for volatility (good or bad) is a risk you should not and do not have to take.

In any business, cash flow can be the difference between success and failure. The focus on it should be a priority just like sales and marketing, however too often that isn’t the case. Without cash, all the sales in the world mean nothing. A sound business strategy aligns your resources to your vision. Make sure your strategy accounts for both.

What are your best tips for driving healthy cash flow?

This post is a revised version of a blog that was originally featured on Commercial Integrator. The original post can be found here.

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About Daniel Newman

Daniel Newman serves as the Co-Founder and CEO of EC3, a quickly growing hosted IT and Communication service provider. Prior to this role Daniel has held several prominent leadership roles including serving as CEO of United Visual. Parent company to United Visual Systems, United Visual Productions, and United GlobalComm; a family of companies focused on Visual Communications and Audio Visual Technologies. Daniel is also widely published and active in the Social Media Community. He is the Author of Amazon Best Selling Business Book "The Millennial CEO." Daniel also Co-Founded the Global online Community 12 Most and was recognized by the Huffington Post as one of the 100 Business and Leadership Accounts to Follow on Twitter. Newman is an Adjunct Professor of Management at North Central College. He attained his undergraduate degree in Marketing at Northern Illinois University and an Executive MBA from North Central College in Naperville, IL. Newman currently resides in Aurora, Illinois with his wife (Lisa) and his two daughters (Hailey 9, Avery 5). A Chicago native all of his life, Newman is an avid golfer, a fitness fan, and a classically trained pianist

Why 3D Printed Food Just Transformed Your Supply Chain

Hans Thalbauer

Numerous sectors are experimenting with 3D printing, which has the potential to disrupt many markets. One that’s already making progress is the food industry.

The U.S. Army hopes to use 3D printers to customize food for each soldier. NASA is exploring 3D printing of food in space. The technology could eventually even end hunger around the world.

What does that have to do with your supply chain? Quite a bit — because 3D printing does more than just revolutionize the production process. It also requires a complete realignment of the supply chain.

And the way 3D printing transforms the supply chain holds lessons for how organizations must reinvent themselves in the new era of the extended supply chain.

Supply chain spaghetti junction

The extended supply chain replaces the old linear chain with not just a network, but a network of networks. The need for this network of networks is being driven by four key factors: individualized products, the sharing economy, resource scarcity, and customer-centricity.

To understand these forces, imagine you operate a large restaurant chain, and you’re struggling to differentiate yourself against tough competition. You’ve decided you can stand out by delivering customized entrees. In fact, you’re going to leverage 3D printing to offer personalized pasta.

With 3D printing technology, you can make one-off pasta dishes on the fly. You can give customers a choice of ingredients (gluten-free!), flavors (salted caramel!), and shapes (Leaning Towers of Pisa!). You can offer the personalized pasta in your restaurants, in supermarkets, and on your ecommerce website.

You may think this initiative simply requires you to transform production. But that’s just the beginning. You also need to re-architect research and development, demand signals, asset management, logistics, partner management, and more.

First, you need to develop the matrix of ingredients, flavors, and shapes you’ll offer. As part of that effort, you’ll have to consider health and safety regulations.

Then, you need to shift some of your manufacturing directly into your kitchens. That will also affect packaging requirements. Logistics will change as well, because instead of full truckloads, you’ll be delivering more frequently, with more variety, and in smaller quantities.

Next, you need to perfect demand signals to anticipate which pasta variations in which quantities will come through which channels. You need to manage supply signals source more kinds of raw materials in closer to real time.

Last, the source of your signals will change. Some will continue to come from point of sale. But others, such as supplies replenishment and asset maintenance, can come direct from your 3D printers.

Four key ingredients of the extended supply chain

As with our pasta scenario, the drivers of the extended supply chain require transformation across business models and business processes. First, growing demand for individualized products calls for the same shifts in R&D, asset management, logistics, and more that 3D printed pasta requires.

Second, as with the personalized entrees, the sharing economy integrates a network of partners, from suppliers to equipment makers to outsourced manufacturing, all electronically and transparently interconnected, in real time and all the time.

Third, resource scarcity involves pressures not just on raw materials but also on full-time and contingent labor, with the necessary skills and flexibility to support new business models and processes.

And finally, for personalized pasta sellers and for your own business, it all comes down to customer-centricity. To compete in today’s business environment and to meet current and future customer expectations, all your operations must increasingly revolve around rapidly comprehending and responding to customer demand.

Want to learn more? Check out my recent video on digitalizing the extended supply chain.

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Hans Thalbauer

About Hans Thalbauer

Hans Thalbauer is the Senior Vice President, Extended Supply Chain, at SAP. He is responsible for the strategic direction and the Go-To-Market of solutions for Supply Chain, Logistics, Engineering/R&D, Manufacturing, Asset Management and Sustainability at SAP.

How to Design a Flexible, Connected Workspace 

John Hack, Sam Yen, and Elana Varon

SAP_Digital_Workplace_BRIEF_image2400x1600_2The process of designing a new product starts with a question: what problem is the product supposed to solve? To get the right answer, designers prototype more than one solution and refine their ideas based on feedback.

Similarly, the spaces where people work and the tools they use are shaped by the tasks they have to accomplish to execute the business strategy. But when the business strategy and employees’ jobs change, the traditional workspace, with fixed walls and furniture, isn’t so easy to adapt. Companies today, under pressure to innovate quickly and create digital business models, need to develop a more flexible work environment, one in which office employees have the ability to choose how they work.

SAP_Digital_Emotion_BRIEF_image175pxWithin an office building, flexibility may constitute a variety of public and private spaces, geared for collaboration or concentration, explains Amanda Schneider, a consultant and workplace trends blogger. Or, she adds, companies may opt for customizable spaces, with moveable furniture, walls, and lighting that can be adjusted to suit the person using an unassigned desk for the day.

Flexibility may also encompass the amount of physical space the company maintains. Business leaders want to be able to set up operations quickly in new markets or in places where they can attract top talent, without investing heavily in real estate, says Sande Golgart, senior vice president of corporate accounts with Regus.

Thinking about the workspace like a designer elevates decisions about the office environment to a strategic level, Golgart says. “Real estate is beginning to be an integral part of the strategy, whether that strategy is for collaborating and innovating, driving efficiencies, attracting talent, maintaining higher levels of productivity, or just giving people more amenities to create a better, cohesive workplace,” he says. “You will see companies start to distance themselves from their competition because they figured out the role that real estate needs to play within the business strategy.”

The SAP Center for Business Insight program supports the discovery and development of  new research-­based thinking to address the challenges of business and technology executives.

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Sam Yen

About Sam Yen

Sam Yen is the Chief Design Officer for SAP and the Managing Director of SAP Labs Silicon Valley. He is focused on driving a renewed commitment to design and user experience at SAP. Under his leadership, SAP further strengthens its mission of listening to customers´ needs leading to tangible results, including SAP Fiori, SAP Screen Personas and SAP´s UX design services.

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The Future Of Supplier Collaboration: 9 Things CPOs Want Their Managers To Know Now

Sundar Kamak

As a sourcing or procurement manager, you may think there’s nothing new about supplier collaboration. Your chief procurement officer (CPO) most likely disagrees.
Forward-thinking CPOs acknowledge the benefit of supplier partnerships. They not only value collaboration, but require a revolution in how their buying organization conducts its business and operations. “Procurement must start looking to suppliers for inspiration and new capability, stop prescribing specifications and start tapping into the expertise of suppliers,” writes David Rae in Procurement Leaders. The CEO expects it of your CPO, and your CPO expects it of you. For sourcing managers, this can be a lot of pressure.

Here are nine things your CPO wants you to know about how supplier collaboration is changing – and why it matters to your company’s future and your own future.

1. The need for supplier collaboration in procurement is greater than ever

Over half (65%) of procurement practitioners say procurement at their company is becoming more collaborative with suppliers, according to The Future of Procurement, Making Collaboration Pay Off, by Oxford Economics. Why? Because the pace of business has increased exponentially, and businesses must be able to respond to new market demands with agility and innovation. In this climate, buyers are relying on suppliers more than ever before. And buyers aren’t collaborating with suppliers merely as providers of materials and goods, but as strategic partners that can help create products that are competitive differentiators.

Supplier collaboration itself isn’t new. What’s new is that it’s taken on a much greater urgency and importance.

2. You’re probably not realizing the full collective power of your supplier relationships

Supplier collaboration has always been a function of maintaining a delicate balance between demand and supply. For the most part, the primary focus of the supplier relationship is ensuring the right materials are available at the right time and location. However, sourcing managers with a narrow focus on delivery are missing out on one of the greatest advantages of forging collaborative supplier partnerships: an opportunity to drive synergies that are otherwise perceived as impossible within the confines of the business. The game-changer is when you drive those synergies with thousands, not hundreds of suppliers. Look at the Apple Store as a prime example of collaboration en masse. Without the apps, the iPhone is just another ordinary phone!

3. Collaboration comes in more than one flavor

Suppliers don’t just collaborate with you to provide a critical component or service. They also work with your engineers to help ensure costs are optimized from the buyer’s perspective as well as the supplier’s side. They may even take over the provisioning of an entire end-to-end solution. Or co-design with your R&D team through joint research and development. These forms of collaboration aren’t new, but they are becoming more common and more critical. And they are becoming more impactful, because once you start extending any of these collaboration models to more and more suppliers, your capabilities as a business increase by orders of magnitude. If one good supplier can enable your company to build its brand, expand its reach, and establish its position as a market leader – imagine what’s possible when you work collaboratively with hundreds or thousands of suppliers.

4. Keeping product sustainability top of mind pays off

Facing increasing demand for sustainable products and production, companies are relying on suppliers to answer this new market requirement.

As a sourcing manager, you may need to go outside your comfort zone to think about new, innovative ways to collaborate for achieving sustainability. Recently, I heard from an acquaintance who is a CPO of a leading services company. His organization is currently collaborating with one of the largest suppliers in the world to adhere to regulatory mandates and consumer demand for “lean and green” lightbulbs. Although this approach was interesting to me, what really struck me was his observation on how this co-innovation with the supplier is spawning cost and resource optimization and the delivery of competitive products. As reported by Andrew Winston in The Harvard Business Review, Target and Walmart partnered to launch the Personal Care Sustainability Summit last year. So even competitors are collaborating with each other and with their suppliers in the name of sustainability.

5. Co-marketing is a win-win

Look at your list of suppliers. Does anyone have a brand that is bigger than your company’s? Believe it or not, almost all of us do. So why not seize the opportunity to raise your and your supplier’s brand profile in the marketplace?

Take Intel, for example. The laptop you’re working on right now may very well have an “Intel inside” sticker on it. That’s co-marketing at work. Consistently ranked as one of the world’s top 100 most valuable brands by Millward Brown Optimor, this largest supplier of microprocessors is world-renowned for its technology and innovation. For many companies that buy supplies from Intel, the decision to co-market is a strategic approach to convey that the product is reliable and provides real value for their computing needs.

6. Suppliers get to choose their customers, too

Increased competition for high-performing suppliers is changing the way procurement operates, say 58% of procurement executives in the Oxford Economics study. Buyers have a responsibility to the supplier – and to their CEO – to be a customer of choice. When the economy is going well, you might be able to dictate the supplier’s goods and services – and sometimes even the service delivery model. When times get tough (and they can very quickly), suppliers will typically reevaluate your organization’s needs to see whether they can continue service in a fiscally responsible manner. To secure suppliers’ attention in favorable and challenging economic conditions, your organization should establish collaborative and mutually productive partnerships with them.

7. Suppliers can help simplify operations

Cost optimization will always be one of your performance metrics; however, that is only one small part of the entire puzzle. What will help your organization get noticed is leveraging the supplier relationship to innovate new and better ways of managing the product line and operating the business while balancing risk and cost optimization. Ask yourself: Which functions are no longer needed? Can they be outsourced to a supplier that can perform them better? What can be automated?

8. Suppliers have a better grasp of your sourcing categories than you do

Understand your category like never before so that your organization can realize the full potential of its supplier investments while delivering products that are consistent and of high quality. How? By leveraging the wisdom of your suppliers. To be blunt: they know more than you do. Tap into that knowledge to gain a solid understanding of the product, market category, suppliers’ capabilities, and shifting dynamics in the industry, If a buyer does not understand these areas deeply, no amount of collaboration will empower a supplier to help your company innovate as well as optimize costs and resources.

9. Remember that there’s something in it for you as well

All of us want to do strategic, impactful work. Sourcing managers with aspirations of becoming CPOs should move beyond writing contracts and pushing PO requests by building strategic procurement skill sets. For example, a working knowledge in analytics allows you to choose suppliers that can shape the market and help a product succeed – and can catch the eye of the senior leadership team.

Sundar Kamak is global vice president of solutions marketing at Ariba, an SAP company.

For more on supplier collaboration, read Making Collaboration Pay Off, part of a series on the Future of Procurement, by Oxford Economics.

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The CFO Role In 2020

Estelle Lagorce

African American businessman looking out office window --- Image by © Mark Edward Atkinson/Blend Images/CorbisThe role of the CFO is undergoing a serious transformation, and CFOs can expect their role to continue to evolve, according to a recent CFO.com article by Deloitte COO and CFO Frank Friedman.

In the futurist article, Friedman says one of the biggest factors that will contribute to the CFO’s significant change over the next five years is technology.

Digital technology is obviously expected to drive change in high-tech companies, but Friedman says it’s industries outside of the tech sectors that are of particular interest, as they struggle to understand how to grasp and harness the digital capabilities available to them.

Working with high tech in low-tech industries

Five years from now, a finance team may be defined by how well it uses technology and innovative business tools, regardless of what industry it’s in. The article outlines some examples of ways that digital technology will increasingly be used by CFOs in “non-tech” sectors:

  • Predictive analytics: CFOs in manufacturing companies can forecast results and produce revenue predictions based on customer-experience profiles and current demand, instead of comparing to previous years as most companies still do today.
  • Social media and crowdsourcing: You may not think CFOs spend a lot of time on social media or crowdsourcing sites, but these methods can actually expedite finance processes, such as month-end responsibilities of the finance organization.
  • Big Data: CFOs already have a lot of data at their fingertips, but in 2020 they will have even more. CFOs in both tech and non-tech sectors who understand how to use that data to make valuable, informed decisions, can strategically guide their company and industry in a more digitally oriented world.

To do this, Friedman says CFOs can lead the way by addressing some critical areas:

  1. Know the issues: Gather the key questions that leaders expect Big Data analytics to answer.
  1. Make data easily accessible: Collect data that is manageable and easy to access.
  1. Broaden skills: The finance team needs people with the skills to understand and strategically interpret the data available to them.

The tech-savvy CFO

The role of today’s CFO has already expanded to include strategic corporate growth advice as well as managing the bottom line. In 2020, Friedman says expectations placed on the CFO are presumed to be even greater, and CFOs will likely need a much more diverse, multidisciplinary skill set to meet those demands.

The article details several traits and skills that CFOs will need in order to keep up with the pace of digital change in their role.

  1. Digital knowledge: CFOs must be tech-savvy in order to capitalize on technical innovations that will benefit their company and their industry as a whole.
  1. Data-driven execution: CFOs will need the ability to execute company strategy and operations decisions based on data-driven insights.
  1. Regulatory compliance: Regulations continue to be more stringent globally, so CFOs will need to be proficient at working closely with regulators and compliance systems.
  1. Risk management: With the growing global economy comes increased cyber and geopolitical risks worldwide. The CFOs of 2020, especially those in large multinational organizations, will need to have the expertise to monitor and manage risk in areas that may be unforeseen today.

The future CFO’s well-rounded resume

By 2020, the CFO role will require much more than just an accounting background. According to Deloitte’s Frank Friedman, “CFOs may need to bring a much more multidisciplinary skill set to the job as well as broader career experiences, from working overseas to holding positions in sales and marketing, and even running a business unit.”

So if you’re a current or aspiring CFO, you have five years to round out your resume with the necessary skills to be ready for the digitally driven role of the CFO in 2020.

The above information is based on the CFO.com article What Will the CFO Role Look Like In 2020?” by Deloitte COO & CFO, Frank Friedman – Copyright © 2015 CFO.com.

Want to learn more about best practices for transforming your finance organization? View the SAP/Deloitte Webinar, “Reshaping the Finance Function”.

For an in-depth look at digital technology’s role in business transformation, download the SAP eBook, The Digital Economy: Reinventing the Business World.

To learn more about the business and technology factors driving digital disruption, download the SAP eBook, Digital Disruption: How Digital Technology is Transforming Our World.

To read more CFO insights from a tech industry perspective, read the Wall Street Journal article with SAP CFO Luka Mucic: Driving Insight with In-memory Technology.

Discover 7 Questions CFOs Should Ask Themselves About Cyber Security.

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Estelle Lagorce

About Estelle Lagorce

Estelle Lagorce is the Director, Global Partner Marketing, at SAP. She leads the global planning, successful implementation and business impact of integrated marketing programs with top global Strategic Partner across priority regions and countries (demand generation, thought leadership).