Modernizing Back-Office Functions Helps CFOs Build Cash Flow ‘Control Tower’

Navigating decades of high inflation, unsure whether their banking relationships are as sturdy as they’d like, chief financial officers and finance teams need to set up a proverbial “control tower” to manage cash flow.

Corcentric President and Chief Operating Officer Matt Clark told PYMNTS’ Karen Webster in an interview that there’s been a widespread shift in the back office to build that control tower, a central point of data that helps chart the course forward.

In B2B payments, just going along with “the way it’s always been done, and saying, ‘We’ll get paid whenever we get paid’ is not enough,” he told Webster. “There’s got to be a different mindset in place, and a mentality, to get some control over this.”

There’s a seismic change in B2B payments, he said, with a collaborative mindset as companies work with suppliers to give rise to supply chains that are financially sound.

Not Just Price

As buyers and suppliers interact, he said, price is important.

“But price is not the be all, end all,” he said. “… All roads lead back to cash flow, and specifically, to optimizing cash flow.”

Companies need to examine everything from payment modality to timing strategies to find ways to optimize the entire transaction lifecycle. He said the total cost of ownership must be considered, and transaction efficiency sits high on the list.

In the wake of the bank runs and the collapses of Silicon Valley Bank and Signature Bank, he said, CFOs are training their sights on the very visibility of cash flow.

“They want to know where things stand and need to think about what they can do different to make sure they can survive the choppy waters that lie ahead,” Clark said.

To get there, he said, that control tower comes into play, where executives can better understand what levers can be pulled to free up more cash. That means harnessing data and analyzing it in new ways.

“There’s a lot of room for improvement,” he said, on getting that data in place “on the day-to-day transaction side of the equation, in terms of how cash is allocated when companies buy things from their suppliers.”

There’s been a growing acknowledgment of, and embrace of, the benefits of automation.

“Everybody is looking across the board and asking how they can leverage some of this new great technology that’s out there,” he said, noting that advanced technologies, including artificial intelligence (AI), are already lending real value to businesses as they seek to do more with less amid significant layoffs. Back-office functions tend to scale as companies grow, so automating them to reduce costs and redundancies can pay dividends.

Re-Examining Payments

Asked by Webster how B2B payments are changing, Clark said that CFOs are focusing more actively on cash conversion cycles. Having some control over payments timing translates into having some control over cash flow. Traditionally, there’s been the classic push/pull of companies that want to hang on to cash as long as possible (stretching out their days payable outstanding) and companies that want to be paid as soon as possible (thus shortening their days sales outstanding).

For the suppliers, the tension can be palpable. The financial situation of their buyers determines how quickly they might be paid. The macro climate is nothing if not volatile. The impact might be most keenly felt by segments like manufacturing, where producers must buy raw materials and other goods that must be made into other products before a sale.

Healthcare is another vertical where cash flow pressures are pronounced, as the sector is marked by fragmentation, high payment volumes, and high transaction volumes across a variety of stakeholders.

Companies such as Corcentric, said Clark, can act as the middleman between enterprises and their customers to ensure that firms can be paid when they want to be paid. Within the platform, there’s the opportunity to take a “trade finance position that creates the flexibility to get the right combination of payment timing and payment modality.”

The enhanced cash flow visibility makes it easier for finance executives to make medium-term and even longer-term plans about where they want to go strategically, he said. The months ahead may be uncertain, but there are some silver linings.

“Troubles come to shore, and all of a sudden people are more open to thinking and acting differently,” he said. And as cash flow remains top of mind, “with choppy waters ahead, you’ve got to be proactive.”