In this episode, Director, Customer Success at Sidetrade Andrea Baker discusses best practices for finance teams to free up cash and fight inflation. Protecting and accelerating cash flow has never been so critical as bad debt risk and inflation are dramatically increasing everywhere. In today’s market climate, the cost of doing business is increasing more than 2% every 90 days. Delays in accounts receivable can lead to less working capital and less liquidity, making receivables the secret weapon during times of inflation.
In this episode, Director, Customer Success at Sidetrade Andrea Baker discusses best practices for finance teams to free up cash and fight inflation. Protecting and accelerating cash flow has never been so critical as bad debt risk and inflation are dramatically increasing everywhere. In today’s market climate, the cost of doing business is increasing more than 2% every 90 days. Delays in accounts receivable can lead to less working capital and less liquidity, making receivables the secret weapon during times of inflation.
Welcome to Finance to Futurist, a Sidetrade podcast series on how innovation data and AI are disrupting order-to- cash.
Natalie Silverman:Hi, this is Natalie Silverman for Sidetrade. Welcome to Finance to Futurist. On today's episode, we're discussing a topic that's on everyone's mind - inflation. Protecting and accelerating cash flow has never been so critical as bad debt risk and inflation are dramatically increasing everywhere. In today's market climate, the cost of doing business is increasing 2% every 90 days. Delays in accounts receivable equals less working capital and less liquidity, making receivables the secret weapon during times of inflation. Please welcome Director, Customer Success at Sidetrade, Andrea Baker. Good morning, Andrea and thanks for sitting down for Finance to Futurist.
Andrea Baker:Hi, I'm Andrea Baker, Director of Customer Success for Northern Europe and Asia-Pac here at Sidetrade.
Natalie Silverman:Well, Andrea, it's great to have you back on the podcast. Excited to have you in a little bit of a different role. And again, congratulations on moving to the customer success team.
Andrea Baker:Thank you very much. I'm really excited to be working with all of our wonderful customers.
Natalie Silverman:Well, you know more about the customer experience than anybody. So I thought you would be a great expert to talk about a topic that's on everybody's mind right now. Let's talk inflation today. I know it's a word that I feel brings fear to some people. But I also think it brings opportunity. So that's what I really want to talk about is as a CFO today, we know that's one of the top concerns. We actually saw that there was a recent survey done that said three quarters of CFOs are really concerned about inflation and how it's affecting their business. There was a statistic also that I think is really eye opening that we've heard recently, and it's about the cost of doing business is going up 2% every 90 days. So in your opinion, how do CFOs protect their cash in this market climate?
Andrea Baker:Yeah, and I think that's one of many pieces of research coming out. And that's really a sort of a mid-range estimate. I think one of the things that CFOs has to do when they're managing their working capital is balanced that ecosystem around how they operate. So for me, and for the experience I've had working with CFOs, it's around making sure the data that you have today and the forecasting and the modeling, you have to take you through the next 6, 9, 12 months is robust enough, and that when you're looking at maximizing your cash position, you understand the impact of the different levers you have. So if you have the desire to increase your cash position without borrowing more from a bank, and therefore attracting those interest rates, which obviously go up alongside inflation, then you can choose to pay your suppliers over a longer period of time. So that's one thing, you know, just put a brake on your accounts payable, you know, that's got a really immediate impact, the money stops flowing out of your business. But the impact on your suppliers and the ecosystem around that is very quick to come. Afterwards, we talked, I think that there's been other podcasts about supply chain fragility, and assurance of getting good to the customer in a timely fashion. And every time you put pressure on your accounts payable process, you're putting additional risk into that, that's something you don't really want to be doing adjacent and that is your inventory levels. And if you're a company who has to put stock on the shelves, the whole kind of just in time ability to serve your customers with inventory, it's nowhere near as good as it was because of those supply chain fragilities. So do you reduce your stock levels to improve your cash? Well, you can but you then put risk into your supply chain. So there are two things that you can actually control quite quickly. But the impacts are really quite devastating. The place where I would always advise the CFOs to go is to look at your own operating cash and look at your sales ledger. Those debts that are outstanding, the invoices that your customers are due to pay you, that's cash that should be in your bank at the point of time of those terms coming anytime you can get a customer who's paying late to pay you on time, that is a virtuous circle, you've got cash to spend, and you're either saving on interest because you're not diving into an overdraft, or you're actually accumulating interest if it's on deposit. So from an audit to cash perspective, my recommendation for a CFO would be to have a little look at your process from audit to cash and try and identify where you can improve. It may not be in the collections area, it may be in your time to invoice so for example, you could be sending goods out and it's taking a while for those invoices to actually travel to your customer. That could be a really good place to start and see whether you can be a bit more efficient, even through things like you know sending out statements to your customers. Is it automated? Are you putting a lot of effort into the real basics and then take it and build from it from there?
Natalie Silverman:That's great advice. Sometimes CFOs are hesitant to change and I don't blame them and it's not just a CFO, but you know finance departments might think that things are running smoothly or as efficiently as possible and a lot of times, you know, in a market climate like this, people might be hesitant to change the status quo or disrupt what's happening currently. So how would you approach a CFO again, who's worried about maybe making changes to their order-to- cash process right now?
Andrea Baker:It's a great question, because the inflationary pressures coming off the back of COVID. And how everybody had to change, a lot of CFOs have got to a place of stasis and the pace of comfort after two years of, you know, real dynamic changes. And so once you're in that steady ship, it's really hard to say I want to change direction. But what I would say to the CFOs, is you don't have to do it all in one go have a look, get your credit professionals to do some analysis around the processes. And look at those processes where a tweak here and there, a little bit of additional
Natalie Silverman:Well, I think you're right, many organizations visibility can make all of the difference. So you don't have to boil the ocean. But what I would say is, first of all, open your eyes and do a bit of research, have a look at your processing, have a look at the areas that are taking a little bit longer to get the results from and see how you can improve those bit by bit. And it's slightly less scary. And I think the other thing that we're worried about at the moment is around talent acquisition and talent retention, as a consequence of what we've been through globally. For the last couple of years, getting the right people in the right place has been a challenge. And keeping them is also a challenge. So if you have an agenda of continuous improvement, oftentimes that can be mistaken for resource cutting, or cost cutting or headcount cutting. If you concentrate on your processes, and you concentrate on the technology around that, then any changes in your staffing will be more gentle and will be more organic. And so don't don't be afraid of it. Also, different opportunities will arise. If you're looking at how your staff think automation replaces people, right. But as you said, is deployed across the order to cash process, you may find that you can be efficient in one place and then divert that talent to somewhere where it needs a little bit more help one area being in a billing disputes. For example, if you've automated your collections, you're actually probably going to find a few more disputes are surfacing. So you can actually re-roll some of those credit controls to go and help tackle those disputes just as an example of certain things that you can do. it makes people more efficient. So finance teams who are worried about reductions and headcount during this time, it's not that automation is going to replace the people on your team. But hey, maybe they can move off some of those tactical activities, right, that have been taking up most of their time, and like you said, be redeployed to something more strategic.
Andrea Baker:Yeah, or spend more time with those customers, where you've got those big hits of revenue, you've got those large amounts of cash coming in, forming a relationship with the customer should be something that your credit controllers can do so that during the good times, you've got a great relationship, when it hits a bump in the road, that customer knows and trust your credit team. And they will phone you and you know, even if it's something like you know, we need a payment plan, or we need something, if you've invested that time, you've created the capacity, in order to cash process to be closer to the customers that you want to be closer to, then that's going to pay dividends in terms of cash inflows in the future, because they will know you and they will trust you. And if they need some help, they'll come to you, they won't go dark, which is what often happens, if a company finds they're unable to pay to terms, you know, they bury their head in the sand. Whereas if you've created that relationship, then they're more likely to come and you're going to have that visibility and a way to trade through with them.
Natalie Silverman:Well, now that you've moved from a pre-sales capacity over to the customer side, and obviously you are a customer yourself even prior to that. So I feel like you have a really good handle on the customer experience. So I did want to ask you being now on the customer success team and being closer to our clients. How does Sidetrade really help customers future proof their businesses during times like these? Because I think we've talked about sometimes again, the first instinct is to raise prices. And sometimes for some reason receivables is maybe the last thing that people think about. So, you know, what advice would you give when it comes to side trade? And how again, we can help you future-proof your business right now?
Andrea Baker:Absolutely, I think you'd make a good point about process. If we can help our customers meet their audit to cash expectations and the impact on their margins that has that positive impact, then they're less likely to have to increase their prices. So that means that the cash continue to flow in a more normal fashion. And we're not we're not expecting people to dig into their pockets, what we were doing customer success. And what we do in customer success is work very closely with our customers, either the credit managers or CFOs to understand their long-term goals, and to help them using our technology to achieve those goals in a really measured fashion. So if we see that a customer has a reduction in DSO goal, then we will work really closely with them to help them to use the system in the areas which are going to make the most impact on the reduction of data. So if we have customers who have issues with uploading invoicing into their customers portals, we can help them with our technology to make that process more efficient and more effective. So we would look at the customer's overall goals. And then we would work with them using the systems and the platform we have, and our best practice and our many years of credit management knowledge to make sure that they make the absolute very best of the system. So it's about optimizing the customers use training hints and tips, we also share best practice amongst our customers. So we have a lively community of customers doing different things with the platform, and we feed back in centrally, and if we see that our customers got a great success on a particular area, then we'll encourage that customer to perhaps come on a webinar with us and describe how they've made this particular piece of the module or this particular part of the platform work for them. And again, that's, you know, a bit of paying it forward. And a lot of our customers are really happy to do that.
Natalie Silverman:Well, I know that you're going to help them even more being again on the other side of the house. And so again, really glad that you've made that move. And Andrea, one last question for you. We've talked a lot about what I'm calling finance transformation. And I think it's beyond just digital transformation with sometimes connotates just technology. So finance transformation is this idea of people and process tech, and data, and how all of those together can make your company more resilient. How can CFOs leverage data, and technology and people and process all that together to become more prescriptive and more forward thinking and forward looking right now,
Andrea Baker:I love the way you describe it, because we're brought up with people, process and technology. But actually for me data's always first. And I know that's a more recent kind of evolution. But the data is the currency, which helps you to understand where you've been and where you're going. So I would encourage the CFO to really get his finance team to understand the data, understand the customers and have a look at the patterns and the trends that they've seen. Understanding what your customers behavior is, is equally important to understanding how much they can buy from you, or what is outstanding on their ledger. It's all about customer behavior, and how you can predict what's going to happen based on the behaviors they've had before, that's a much clearer indication of risk than how much you're actually going to sell to them. Because the customer who's consistently paying on time or consistently has queries, nothing really is going to change unless you change some root causes with them or you improve the relationship. The getting the data as to how your customer behaves and wants to buy from you is going to be what sets you up for success. Without that data you're modeling with, you know, an empty vessel, you need to be able to understand the facts and the figures, and then build your models around that rather than theoretical models that you then have to reverse your data into. So look at your data. Don't be afraid of an age-debt detail. It's usually a huge document, but there's a lot of value to be seen. You know, having your financial control stuff having some of your credit staff have a really good look at those ledgers on a fairly regular basis right down to how many debits and how many credits because that type of information tells you about customer behavior, and it gives you the patterns that you'll need to make your forecasts and models for the future.
Natalie Silverman:Thanks, Andrea, for your insights into the future of finance. For Sidetrade, this is Natalie Silverman.
Conclusion:This has been another episode of Finance to Futurist a Sidetrade podcast series. Make sure you catch every episode by subscribing to our podcast on sidetrade.com or through your podcast platform of choice. Thanks so much for tuning in. This podcast is brought to you by Sidetrade and is for general information purposes only. All rights reserved.