Benchmarks of business performance
indicate that ERP systems and other
enterprise technologies have transformed
customer and supply chain processes, but
that finance’s performance has hardly
changed. While some companies have
profoundly improved the performance of
their financial processes through ERP
systems, financial functions are still
neglected in many businesses, and days
sales outstanding (DSO) and working
capital needs are considerably high in
many industries.1 Finance department
costs consume more than 1% of
revenues in many companies, and CFOs
struggle with poor transparency of their
daily cash flows.
In times when unprecedented
economic uncertainty and soaring share-
holder expectations are putting every
function under closer scrutiny than ever
before, the finance function should be
driving business, not holding it back.
The primary objective for a better
and more optimized finance department
is still the same: Manage cash and tie up
as little working capital as possible.The
key performance indicator in this context
is the cash flow cycle, which encompasses
the time period from when a supplier
delivers materials until the receivables
department collects cash from customers
(see sidebar below).The longer the cash
flow cycle is, the higher the working
capital needs; every reduction made
within the cash flow cycle will immedi-
ately free up liquid assets. So how do
you streamline the cash flow cycle?
Think of Finance as a
Supply Chain
One approach is to consider finance
itself as a supply chain — a multifac-
eted, end-to-end flow of transactions,
cash, value, and information that touches
customers, suppliers, banks, and internal
functions and relationships. Unlike the
physical supply chain, the financial
supply chain deals with the flow of cash
instead of goods. But the financial
supply chain is clearly a supply chain —
Transform Your Cash Flow Processes with
Financial Supply Chain Management
and one that runs through a company’s
business like a thread, tying together
every function and process. Just li