Introducing The Insider’s Guide To Improving Payments And Cash Flow

Alan Cohen and Scott Pezza

This is the introductory blog in our Payments and Cash Flow Series, explaining why you should act now to improve your payments and cash flow.

Lack of defined goals, organizational will, and alignment across stakeholders: that’s the reality for most companies when it comes to payment processing and cash flow management. But it doesn’t need to stay that way. You just need guidance on best-practice approaches, and that’s what you will get in this blog series.

Through 12 blogs published over the next few months, we will share our more than 40 years of experience in business payments and cash flow management to help you plan, develop, and execute a successful program. Whether you are just starting your payment and/or cash flow initiative, in the middle of implementing one, or growing your program, this blog series will help you along the way.

Why do you need better payments and cash flow solutions?

Payments: Payment processes have been largely unchanged for 30 years. Electronic payments continue to increase. So does fraud. Identifying better methods to simplify the process and shifting responsibilities (for example, “Know Your Customer” checking, supplier bank account maintenance, and so on) is key to mitigate risk, maintain or lower costs, and improve the supplier experience.

Cash flow: Improving cash flow creates enormous value that is hard to replicate in other functions or via sales or margin growth.

  • Every $1 billion in targeted spend extended by 15 days (payment terms) results in more than $40 million of cash flow improvement.

What about suppliers that prefer early payment?

  • There is opportunity to earn $1-$2 million per $1 billion in targeted spend in early-payment discounts, at high annual percentage rates (APRs), with low risk, as funds have already been committed via the procurement process.

Why now?

Your competitors are reading information just like this, and are either planning or executing their own strategies right now. Who can blame them? By paying earlier than necessary—and earlier than your peers—you’re effectively financing their business. Delaying efforts to optimize your payment process and timing of payment gives competitors an advantage.

The numbers shared above are valuable, but they are “only” metrics. What is truly important is what these metrics mean to your company. For example, could one extra day of reduced days payable outstanding (DPO) mean:

  • Opening a new store or manufacturing plant
  • Increasing research and development
  • Raising dividends for your shareholders

That’s how you align this initiative to your corporate strategy. Improving cash flow and discount savings results is a competitive advantage, providing less reliance on banks for credit, and creating shareholder value. Moving forward now unlocks the same value that would likely require the equivalent of 15%–25%+ revenue growth. What are you waiting for?

What makes this series different?

There are three main answers to this question:

  • Each blog will be brief and direct, leveraging the advice of two experts with decades of payments and cash flow experience.
  • There will be a clear call to action with defined next steps, to help you plan, execute, and succeed with your payment and/or cash flow initiative.
  • We will share additional resources upon request to help you achieve your desired outcome. This can be worksheets, project plans, presentations, and other tools that can help you implement a recommended call to action.

To kick off the series, our next post will examine the importance of organizational will and alignment in achieving success. You will learn about the steps you need to take for organizational alignment, and a call to action to make it happen.

To learn about best-practice approaches to managing cash and optimizing working capital, read this complimentary e-book from the specialized treasury consulting firm Strategic Treasurer: Leading Practices for Treasury in the Financial Supply Chain.

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Alan Cohen

About Alan Cohen

Alan Cohen is VP Payments & Financing Strategy, SAP Ariba. Alan has over 20 years of payments and working capital experience as a practitioner, consultant, and banker. In his current role, he leads the payments and financing strategy for SAP Ariba to help clients achieve improved business outcomes. Previously, at Coca-Cola Enterprises, Alan led the procure-to-pay transformation that encompassed sourcing, procurement, and payables automation, and the company became one of the first to benefit from dynamic discounting. Alan holds a supply chain management degree from Arizona State University. In 2015, he was part of a team that won SAP’s Hasso Plattner Founders Award for an innovative approach to B2B payments. Alan lives in Atlanta with his wife and 2 daughters. He has served on the board of the Weinstein School since 2007 and actively participates in 2nd Helpings, a nonprofit to rescue and deliver surplus food.

Scott Pezza

About Scott Pezza

As part of SAP Ariba's Digital Transformation Organization's Center of Excellence, Scott researches, compiles, and shares best-practice information to help SAP Ariba's customers get the most out of their investments. He has a dual focus on the emerging technologies (AI/ML, IoT, Blockchain, etc.) across the source-to-settle cycle, as well as a specific interest in the financial supply chain (invoice management, payments, discounting, and supply chain finance). His research helps inform strategic planning, performance measurement, and program execution. He has spent the past 17 years in the B2B technology space, in roles ranging from software development and support to research and consulting. Scott earned his BA in English and Philosophy from Clark University, his MBA from Boston University Graduate School of Management, and his JD from Boston University School of Law, where he served on the Executive Board of the Annual Review of Banking and Financial Law.