Creating a virtuous circle of faster cycle times and improved cash flow
Monday, 18 Apr 2016
In over 30 years of working with companies of all sizes in markets all around the world, we at Basware have identified 4 stages that companies typically move through on the journey to achieving true financial agility. In this blog & accompanying video, I discuss the Networked Company.
Vice President, Global Product Marketing
In the Networked Company, the focus has shifted beyond operational efficiency to strategic impact. The company is forging strategic relationships with suppliers, creating significant value for both the company and its suppliers.
At this stage, accounts payable typically operates as a shared service center. Procurement is focused on building strategic supplier relationships and establishing programs to safeguard the company against operational and regulatory risk.
And this is where you start seeing what we call ‘The Network Effect’.
There are basically three ways to improve cash flow in the supply chain once you’ve streamlined and automated processes: collect earlier, pay later or pay less.
Buying and selling in an open B2B network – where buyers and sellers are connected and transactions are captured in rich detail - creates a virtuous circle of faster cycle times and improved cash flow.
Suppliers have reduced receivables risk because they get paid more quickly, so they can grow the business and pass on savings to customers, while buyers benefit from the more flexible payment programs that are now available to them.
And in a Networked Company, the level of integration within the Finance function makes it possible to optimize and scale the company’s cash management strategies across the business, enabling new levels of financial agility.
Networked company performance typically looks like this:
- 95% on-time payments
- $18 average cost per purchase order (PO)
- 50-70% spend under management
- 40% of suppliers e-invoice enabled
To find out more about how to develop your financial operations to the Networked Company level, download our free ebook: “A Guide to Networked Purchase-to-Pay’.