CM magazine May 2019

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Maintain your balance
Given the increasing external forces on
business, impacts to your working capital and
cash metrics are inevitable as the calendar
rolls toward end of period financial reporting.
Or are they?
Balance sheets don’t simply add up, they reflect an intricate balancing
effort. Numerous ratios and key performance metrics must be
individually managed. The numbers, in aggregate, tell the story of your
business.
Whether Treasury, FP&A, or Controller, you help write that story. Yet
there is so much of the narrative your business cannot control. The
uncertainty of Brexit. The resulting requirement to stockpile inventory in
some industries. A weaker sterling pushing up the price of raw materials
for exporters. All this volatility impacts short-term investments. Globally,
payment terms and customer receipts delays are lengthening, according
to Atradius’ Payment Practices Barometer. Great Britain has the highest
proportion of overdue B2B invoices in Western Europe at 48.7%. That’s a
lot to balance.
Finance professionals can leverage new technology to gain control and
stability, taking the stress out of the financial reporting balancing act.
Tim Blundy, Enterprise Supplier
Director - EMEA, C2FO, finds
opportunities for global
corporations to improve their
long and short-term working
capital strategies by analysing
accounts receivables solutions
and overall liquidity and working
capital goals.
m / +44 (0) 7340711557
e / tim.blundy@c2fo.com
Given these external forces, customer receipts remain a variable that is
at times very challenging to accurately forecast and control. This is
often because your customers are under the same pressures you face,
thus creating a global economic environment of longer payment terms
that become the cost of doing business.
This “cost” shows up on your balance sheet as increasing DSO and aging
A/R values, causing your business to wait longer for sales to convert to
cash. Fortunately, there are tools to put the cash conversion cycle back
in your control.
Using your A/R as a lever
While there are a variety of options that enable your business to
monetise customer receivables prior to invoice maturation, such as
supply chain finance, factoring, and asset-based lending, none offer as
much flexibility and choice as dynamic discounting. With no
underwriting process or contracts, and no third-party financial
intermediary, dynamic discounting offers an on-demand solution for the
timing of when you convert outstanding receivables to cash on hand.
Working capital certainty in an
uncertain climate
Flexible and convenient solutions for
monetising customer receivables should be a
part of any finance professional’s toolkit.
Dynamic discounting enables your business to
pro-actively manage the financial impacts of
the evolving complexity of external economic
factors.
Whether the objective is to support a range of
strategic cash needs driven off events like M&A,
dividend hikes, share repurchases, or even debt
repayments, the subsequent impacts of cash
output can be offset through on-demand
acceleration of customer receivables.
Doing so in a debt-free environment not only
enables you to navigate exposure ratios and
covenants, but it also helps your business
achieve critical key performance indicators and
metrics, such as free cash flow growth targets.
With the right tools that put
control back in your hands, you
can respond to issues in real time
despite the instability that external
factors create.
Business is not as predictable as we wish it were
and it is not easy to maintain balance. But, your
ability to prevent and manage challenges makes
the balancing act far less stressful.
The Recognised Standard / www.cicm.com / May 2019 / PAGE 38 The Recognised Standard / www.cicm.com / May 2019 / PAGE 39