The role of the chief financial officer (CFO) is changing.
Matt Clark, president and chief operating officer of Corcentric, told PYMNTS that as payments go digital, balance sheets get healthier. And the CFOs overseeing it all get a holistic view of cash flow, too.
There’s significant recognition of the benefits of payments modernization. PYMNTS data show that 71% of CFOs have accelerated their efforts since the pandemic began. Of that tally, 38% state that improving balance sheets remains a key motivation.
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More CFOs, Clark said, are realizing that “the order-to-cash lifecycle has to be optimized in order to get the end results you want to achieve as a company.”
The Traditional Way
The traditional order-to-cash cycle is anything but efficient in an age where so much has shifted online. Historically, he said, companies have approached it through a bottom-up approach, stitching together a slew of different point solutions, hoping to get a level of visibility into cash management that never materializes due to the disjointed nature of data and process flows.
“To be fully optimized CFOs really need to step back, look at this in a top-down approach,” he said. And no matter the vertical, the pain points have been the same, he observed.
But the pandemic, and distributed workforces, have necessitated other approaches.
With platforms (such as the one on offer from Corcentric), said Clark, “the CFO owns more of the ‘world’ that operates in and around transaction processing and payments” and can get a better sense of balance sheet health.
Less Reliance on Capital Markets
Better process management is especially prudent in an era of rising rates, where non-financial companies have accumulated more than $11 trillion in debt (and that debt is getting more expensive, he said).
“Everybody needs more capital than they have access to,” said Clark. The hypothetical client of Corcentric that wants to open up 10 more facilities would have to tap a massive credit line to get there. But it might find enough money to fund that expansion through its B2B transaction flow.
To that end, taking days sales outstanding (DSO) to 30 days from 47 days — on millions or billions of dollars in sales — could free up cash to fund those projects. Without the need to fund the debt and make interest payments, he said, “they’re going to have a nice return on the business.”
Getting there requires a deep dive into processes, examining whether invoices are being transmitted as PDFs, for example, whether they are being printed and emailed, and then, ultimately, how they are being paid. Corcentric, he said, offers up an index and score that can help CFOs gauge their level of digitization.
A Move to Digitized Payments for Suppliers
B2B payments will continue to be more card-enabled and digitized. Though in the past those offerings had been buyer-centric, said Clark, now there is more consideration of giving value to suppliers, including accelerated payments.
Looking ahead, we’re in the middle innings of digitization, said Clark — a lot of progress has been made, much progress has yet to be made. CFOs increasingly want to have, and need to have, end-to-end capability to have flexible payment options.
It’ll take time, of course.
In part some of the headwinds stem from fragmentation among the providers themselves (so there’s a lot of “noise” in the system, he told PYMNTS). There’s actually more friction, ties to a range of different mousetraps, all designed to tackle the same processes. Education remains critical, he said, in getting CFOs and other executives to consider the benefits of a platform-based (and holistic) approach.
“Being able to get in and create a network effect in a specific vertical because they’re all using the same suppliers, they’re all dealing with the same types of purchases,” can speedily result in better cash flow management, he said.
Used in an optimal way, B2B payments digitization can serve “as a growth enabler — and it fortifies your ecosystem.”