Businesses are at a critical point. Global financial markets are under stress; they are not following fundamental economic principles, and companies cannot get loans and financing easily, if at all. On top of that, demand for products and services is falling, and risk avoidance is paramount.
As a result, businesses are refocusing on short-term, financial imperatives -- cost savings, cashflow preservation, meeting financial covenants, maintaining access to financing, and better risk and credit management.
All of that might make you feel like a mouse in a house full of traps and cats. But if you can identify the key issues -- with the help of a good enterprise resource planning (ERP) or e-commerce system -- you can still assemble a solid financial management solution for hard times.
Take expenses, for instance, which your existing ERP or e-commerce software can help to identify in detail. "If a business can reduce debt by 20 percent, they have effectively increased their income by 20 percent," says Norm Bour, a California-based financial manager. He recommends: "Negotiate everything." Examining debt items can help "to review every expense and determine if it can be reduced, eliminated, or replaced."
The worst thing is to do nothing. "No question, businesses are facing more risk that is outside their control than ever before," Bour says. “Even well run businesses with long track records and astute management are prone to circumstances much bigger than themselves. With that said, I think the biggest risk that most businesses take is to do the same thing they've always done because it's the easiest way to not be proactive."
Greg Maddux, managing director for RSM McGladrey, an accounting and consulting firm, agrees with the need to assess expenses -- and he takes this idea one step further. "Take a look at the cashflow trade balance between your organization as compared to your customers and suppliers. Then, use your negotiated contracts as strategic levers to help you create a competitive advantage... Periodically review and renegotiate contract terms and discounts."
Maddux recommends looking at the entire value stream and doing an "end-to-end analysis of key activities that impact the timing of cashflow. Challenge how and when processes are initiated, which eliminates delays and reduces elapsed time for handoff between departments and companies. This will help you identify where automation can be used to accelerate cashflow conversion results."
Speaking of automation, have you made the most of the systems you already have in place? Maddux observes that "many organizations have made significant investments in systems which are not fully deployed. Many ERP and e-commerce systems have capabilities to help shorten process times when adequately leveraged." He thinks firms should investigate existing processes to ensure they're really getting the most out of them.
Squeezing every bit of value from your existing infrastructure and debt is a suggestion that Jason Jepson of Grander Financial, a financial services company, agrees with completely. Jepson says, "Before companies invest, before they look for funding, before they look at credit management, they need to look at cost containment... Like buying a car, every company believes they got the best deal. The reality is no one gets the best deal until an outside firm comes in to audit."
Ultimately, you may not be able to control when your customers will finally start coming back, but these experts agree that you can get more from what you already have and gain more control of your debt. There may be no miracle way to increase your accounts payable, but the Internet can help you take some action on the bottom line -- even in these bad times.
— Steven J. Vaughan-Nichols, a.k.a. sjvn, has been writing about business and technology since you couldn't get fired for buying IBM; CP/M-80 was the cutting-edge PC operating system; 300 bit/s was a fast Internet connection; and WordStar was the state-of-the-art word processor.