It’s common knowledge that the EU is facing the prospect of a radically different Eurozone with potential changes to the Euro currency and the countries that use it. It therefore isn’t surprising that a recent Deloitte poll found that 37% of finance directors see one or more Eurozone states leaving the single currency in 2012, and subsequently believe this will be the greatest risk to their organization over the next year.. We don’t know the specifics of these changes yet but they are likely to have far-reaching consequences on business practice. So how can businesses prepare?
In a worst-case scenario businesses may have to operate with 14 extra currencies and adjust their cross-border accounting and invoicing solutions to enable these to be invoiced and processed. From a financial management perspective this creates a complex environment.
One of the biggest concerns for organizations if the Eurozone does collapse is the impact on cash flow visibility and the consequences that may result from the increasing interdependency of financial systems. The 2011 Cost of Control Fuzzy Finance research, commissioned by Basware, indicated 71% of global CFOs and finance directors are concerned that greater levels of reliance between different finance solutions present cash flow visibility challenges. 59% think decisions have been made within their business to improve financial operations without a clear understanding of the wider implications on cash flow visibility. The key for businesses is to make sure they have solutions in place that offer true transparency and the flexibility to adapt to economic changes. Whether the Eurozone collapses this year or not, the threat of economic change is constant. Businesses therefore need to be prepared to ensure that their financial infrastructure, including their interdependencies in suppliers can withstand wholesale changes to the Eurozone.
An Open Network, where buyers and suppliers can do business freely and easily, will become critically important in these instances. An Open Network not only improves transparency but allows buyers and suppliers to gain the transactional efficiencies they require, whilst creating equality within the network.
Without adequate processes or strategies in place to respond to periods of potentially massive change, it can become very difficult for businesses to manage spend and gain cash flow visibility. The growth of the global network attests to the increasing need among buyers and suppliers to build close trading relationships and the benefits of an Open Network approach. Buyers and suppliers that use an Open Network can benefit from complete control over cash flow, better working capital management and improved relationships.
In the face of continuing economic challenges and anxieties around a fall out of the Eurozone, many businesses will look to navigate their way through by making processes more efficient and effective. Greater visibility into cashflow and invoicing status can help to improve a business’s confidence in building their financial and procurement strategies and consequently improve its agility in dealing with cashflow issues.