How Supply Chain Finance Can Drive Cash Flow
Supply chain finance is an invaluable tool for lengthening a buyer’s days purchases outstanding and increasing cash flow. SCF has the powerful potential to improve a supplier’s financial viability and reduce a buyer’s purchase costs and internal procurement expenses. Here’s a quick refresher course for supply chain leaders in every industry who want to drive stronger cash flow.
Business leaders have one big reason to be happy these days. Most are heading up companies that are sitting on historically high cash balances. Research by FinListics Solutions shows that in the United States, companies outside of financial services—retailers, distributors, manufacturers, and telecommunications providers, for example—have accumulated almost $2 trillion in cash among them. At companies with more than $1 billion in revenue, cash was equivalent to 8.5 percent of revenue in 2009 compared to 5.2 percent the year before.
Laudable though those numbers may be, they are still not enough to give businesses the long-term resilience they need to sustain growth, let alone to out-compete in today’s volatile global economy. That is why many leading companies are focused on initiatives to further improve cash flow and liquidity. One of these is better management of the cash operating cycle, which is the net number of days in inventory, accounts receivable, and accounts payable.
This article explores the use of supply chain finance (SCF) to better manage the cash operating cycle. SCF can lengthen accounts payable without hurting suppliers’ financial viability; at the same time, it has the potential to lower direct purchasing costs as well as the costs of the procurement transactions themselves. The concepts are well proven, and the tools and techniques are not new. But they are still not used by supply management teams to the extent that they should be. Given the broad-based hunger for improvements in cash flow, the time is right for a short refresher course on the topic.
This complete article is available to subscribers
only. Click on Log In Now at the top of this article for full access. Or, Start your PLUS+ subscription for instant access. |
Not ready to subscribe, but need this article?
Buy the complete article now. Only $20.00. Instant PDF Download.
Access the complete issue of Supply Chain Management Review magazine featuring
this article including every word, chart and table exactly as it appeared in the magazine.
Latest News
Embracing An Agile Ecosystem Through Digital Transformation Port of Baltimore May Not Reopen Until Summer Sales & Operations Planning (S&OP) Mastery A New Priority Greets Procurement Professionals in 2024 Cargo Shipping Remains on Hold in Baltimore Following Bridge Collapse More NewsLatest Resource
Sales & Operations Planning (S&OP) Mastery In this Special Digital Edition of Supply Chain Management Review, you will find insights on the importance of sales and operations planning (S&OP) to an organization’s bottom line.All Resources
Download Article PDF |
Business leaders have one big reason to be happy these days. Most are heading up companies that are sitting on historically high cash balances. Research by FinListics Solutions shows that in the United States, companies outside of financial services—retailers, distributors, manufacturers, and telecommunications providers, for example—have accumulated almost $2 trillion in cash among them. At companies with more than $1 billion in revenue, cash was equivalent to 8.5 percent of revenue in 2009 compared to 5.2 percent the year before.
Laudable though those numbers may be, they are still not enough to give businesses the long-term resilience they need to sustain growth, let alone to out-compete in today’s volatile global economy. That is why many leading companies are focused on initiatives to further improve cash flow and liquidity. One of these is better management of the cash operating cycle, which is the net number of days in inventory, accounts receivable, and accounts payable.
This article explores the use of supply chain finance (SCF) to better manage the cash operating cycle. SCF can lengthen accounts payable without hurting suppliers’ financial viability; at the same time, it has the potential to lower direct purchasing costs as well as the costs of the procurement transactions themselves. The concepts are well proven, and the tools and techniques are not new. But they are still not used by supply management teams to the extent that they should be. Given the broad-based hunger for improvements in cash flow, the time is right for a short refresher course on the topic.
SUBSCRIBERS: Click here to download PDF of the full article. |
Subscribe to Supply Chain Management Review Magazine!
Subscribe today. Don't Miss Out!Get in-depth coverage from industry experts with proven techniques for cutting supply chain costs and case studies in supply chain best practices.
Start Your Subscription Today!
It’s high time to go beyond visibility Driving supply chain flexibility in an uncertain and volatile world View More From this Issue