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Corporations Increase Focus on Cash and Liquidity Management Aberdeen Group Study Reveals

Recent survey findings, prepared by the Aberdeen Group in collaboration with SunGard, U.S. Bank Corporate Payment Systems and Basware, reveal that corporations today are placing increased importance on gaining control and visibility over cash and liquidity management. The report titled, “The 3-Part Balancing Act of Cash Management: Optimizing the Financial Value Chain,” discusses the steps that best-in-class companies are taking to optimize their business processes with the goals of reducing risk, decreasing costs, promoting efficiencies and laying a strong groundwork for generating profits.

The study surveyed 130 companies worldwide, and results indicate that 82% of these companies have increased their focus on cash management in 2009. Fifty three per cent of the Best–in-Class companies polled answered that they were less likely to rely on spreadsheets and manual processes for managing cash. Furthermore, about a third of respondents indicated a need to improve liquidity. Aberdeen Group attributes this statistic to the fact that many companies rely on fragmented processes and systems across treasury, payments and receivables, giving them only a partial view of cash and making predicting cash requirements difficult.

The report recommends that corporations looking to ease the effects of challenging market conditions and achieve improved performance should consider the following:
- Enterprise-level visibility into cash and the financial supply chain, including customers and suppliers
- Effective cash management strategies that are not restricted to operational cash, but encompass treasury, accounts payable and accounts receivable
- Straight-through processing, to facilitate better communication across internal systems and with trading partners

Nasreen Quibria, senior analyst at Aberdeen Group said, “More than a year after the credit crisis reached a crescendo, the contraction in the economy coupled with the squeeze in the credit market has forced companies to diversify their financing options and squeeze liquidity from within.”

Cindy Jutras, vice president of research development and research fellow at Aberdeen Group said, “Interestingly, contrary to the classic approach to cash management that companies collect early, pay late, and invest the residual for the greatest return with a manageable risk, our research indicates that top performing companies are not delaying payment as long as possible. Instead, those with low days sales outstanding also paid invoices more promptly, minimizing late payment fees and lost discounts.”

One company working to reduce DSO and improve cash flow by leveraging receivables management technology is Dresser, Inc. “After we implemented AvantGard, we lowered our DSO, decreased past due A/R, and reduced our bad debt reserve by 20%. With the increase in cash flow, Dresser was also able to decrease working capital requirements, which helped the company as it navigated through the economic downturn,” said Bill Uhrich, director of corporate credit at Dresser, Inc.

C.J. Wimley, executive vice president, corporate solutions at SunGard’s AvantGard business unit, said, “The repercussions of the economic climate have prompted companies to pay increased attention to gaining control over cash and liquidity. Those companies that are taking strategic measures to optimize their systems and processes, such as adopting technology that can bring together treasury, payments and receivables, will gain a holistic view of cash positions and achieve better communication and connectivity both internally and across the broader ecosystem.”


Mercredi 26 Mai 2010

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