Analyst Report Series Webinar

Announcer  00:27

Okay, well welcome everyone to today’s webinar on supply chain finance and cash conversion cycle solutions. This is Brian from Strategic Treasurer and we’re pleased you could join us as we analyze and discuss the latest Treasury Technology Analyst Report. But before I introduce today’s speakers, I have just a few quick announcements. Zoom offers several different ways for us to interact today. If you would like to post comments or questions viewable by all attendees, please use the chat icon in the toolbar. If you’d like to ask your question to just the presenters, please use the q&a icon in the toolbar. You can ask your questions at any time during the presentation and we’ll try to get to as many as we can. But if we don’t get to your question, someone from our team will gladly follow up with you. There will also be a few polling questions throughout today’s webinar, where you’ll be able to select your response from a list of multiple choices. You will need to click the submit button on the polling questions to have your response recorded. If you are here for CPE credits, you will need to answer at least three polls today. And last, please ensure that your zoom display name includes both your first and last name, so we’ll know to whom we should send the credits. Our speakers for today are Paul Galloway, Senior Advisor at Strategic Treasurer. And Craig Jeffery, Founder and Managing Partner of Strategic Treasurer. Welcome Paul and Craig. And I’ll now turn the presentation over to you.

 

Paul Galloway  02:10

Thanks, Brian. Appreciate it. If we can hit slide three. This is the agenda we have for today we have quite a bit we’re going to try to cover so I will be moving swiftly through the slides. Defining the terms will focus on working capital, cash conversion cycles, supply chain finance. When you think about cash conversion cycle, areas that we’ll discuss will be procure to pay, procurement solutions, vendor management compliance, inventory, such as pricing and managing inventory. Order to collection solutions such as counterparty risks, order management collections will also cover supply chain finance, in terms of the old model, or what you would call traditional supply chain finance, a binary structure where you create winners and losers. And a delinked version which creates win-win scenarios. While also discuss you know, who needs supply chain finance, and what factors would lead me to need supply chain finance, perhaps a suppliers working capital or liquidity needs. It’s unique to each company. We’ll talk about those uniqueness, selection and implementation. We’ll talk about the factors for selection for consideration. We’ll also talk about the leading practices, level of involvement, the metrics, the monitoring that should occur. We can go to the next slide, Brian. There’s a lot going on here for defining the terms. And I’ll just start hitting on a couple of these items that I think will be important to the conversation as we move forward. And think about defining supply chain financers various components to consider. Think about the accounting definition, which is you know, account so look at it as working capital current assets slash your current liabilities, it’s the ability to meet your current obligations. It can be easily calculated. So it’s something that’s not onerous for for accounting to calculate or Treasury to calculate. But when Treasury thinks about it, it’s a little bit different because they’re more concerned about do they have enough cash to meet the obligations to run the business? And so they tend to look at what’s called net adjusted working capital, which is your accounts receivable plus inventory last year accounts payable. So it’s a little bit different definition, and helps focus on cash. It also is utilized for optimizing working capital. Working capital is a significant part of liquidity, so you can’t ignore it too little working capital strains, the company too much lowers the organizational value. You need to optimize working capital, optimizing worker capital looks different for each company. It crosses into its industries, the organization, the way it’s structured, the operating needs of the particular organization. optimal level may fluctuate over time. So even though you optimize it today, it doesn’t mean that it’s optimized from today to 510 years down the road or even six months down the road. So you need to monitor your working capital. There’s external and internal factors that can influence it. You need to be flexible, get out, have some flexibility for changes. And when a change comes along, you need to recalibrate. Craig, I think you want to make a couple of comments on this slide as well.

 

Craig Jeffery  06:22

Yeah, a couple things. Hopefully, I’m coming through loud and clear, we had a little bit of a connection issue there for a moment. But the terms, as Paul pointed out, you know, net adjusted working capital is a term of measurement that is really core for Treasury. This is looking at receivables and inventory, less accounts payable. And that’s a you know how much capital is tied up in the working capital or cash conversion cycle. And that’s, that’s a core measurement for those who are optimizing their their working capital. There’s other terms for working capital, where it’s current assets, minus current liabilities, this is a term that bankers oftentimes use. It’s an accounting definition definition as well. And that’s really a measure of the organization’s ability to meet their needs, as they come to pay their obligations as they come do. You know, so the conversion of a receivable to cash in that definition makes no difference. It’s still a current asset receivable as a current asset, as is cash. But I think we all know that cash is king, it’s better to have cash than a receivable. And so we’re looking at isolating those items in the net working capital definition. I know everybody can read the definition by the Euro Banking Association, we’d like that one quite a bit. I think that’s worth reading. But you know, as we think about these terms, what’s happened lately? You know, Paul, you and I have talked about this. I think everyone’s talked about some of the events, you know, from, you know, from last fall and summer, the impact of the war has been having a major impact in Europe, a significant impact globally. So the war of Russia, on Ukraine has had an impact for the use of and supply chain across a number of different sectors that’s creating this problem where we’ve gone from a focus on just in time inventory, to just in case inventory, and not everyone can get the inventory that they need. And so this is creating more organizations to stock up on inventory when they can get it once they’re putting more money into that the increase in inflation, coupled with Central Bank’s raising the interest rates have put a demand on capital as well, across the globe. So access to capital has been a challenge. And so we’ve, you know, over the last nine months or so the renewed emphasis on supply chain financing has really accelerated significantly. And given the news over the past week or so with some very troubling events, with banks seizures, by by the Fed, we’re looking at, you know, more an increased focus on accessing capital. And so whether we’re talking about net adjusted working capital, or we’re talking about overall access to capital, working capital is one of the key levers that organizations have and that’s why it’s, it’s always important, but there’s certainly periods of time where it’s of increased focus, Paul, I know we’ve, we’ve seen that and know that and so the one other thing on this on the bottom of the screen, you can see it’s it’s called the cash conversion cycle automation opportunities. And it looks more like a rectangle. And that’s just because it fits on the page. Well, you may be more used to the rounded items, but I’ll turn it back over you, Paul.

 

Paul Galloway  09:48

Great, thanks, Craig. appreciate those comments. We’re going to focus on cash conversion cycle now. These are areas and the conversion cycle itself. measurement, measurement of time it takes to convert resources into cash flow. So that’s, that’s how I think about cash conversion cycle. How long does it take? How soon am I gonna get that cash. That’s an important thing to know. Majors how efficiently cash is invested in inventory for example, once a company invests cash in inventory becomes a receivable when a sale is made. When the receivable is collected, the company receives cash. Now it’s available to be converted back into a payable for more inventory. So as you think about that’s kind of a general very generalized view of the cash conversion cycle. But that’s exactly what’s happening. from a functional standpoint, the length of time cash spins in each segment of the cash conversion cycle impacts your working capital, a long cash conversion cycle may signal various issues. The three lines of time are days of payable outstanding, also known as DPO days inventory outstanding DIO days sales outstanding DSO like working capital, cash conversion cycle must be optimized. increasing efficiency provides flexibility for liquidity management. It’s not doing things as rapidly as possible. Focus on doing things well without wasting time. The ability to make decisions on when things should be completed, is really vital. So when you think about this cycle as a whole, getting the cash converted sooner benefits organizations that are buyers and suppliers along the chain. When you’re turning that over quicker, you’re able to meet your obligations and generate cash flow in a positive manner. Next slide.

 

Craig Jeffery  12:17

Yeah, well, just just to calm I think that was a great, great explanation, Paul, you know, the, the idea of the efficiency, you talked about the efficiency and efficiency is how quickly you can get put your cash into the cash conversion cycle and get it out. And that has a significant driver on how much you can grow your business, how rapidly can grow without using excessive amounts of cash to fund that. That was a key key point that you made. And so I just wanted to highlight that.

 

Paul Galloway  12:49

Thanks, Craig. Next section here is procurement to pay solutions. There’s a variety of solutions out there. Some of them address single department pain points, some help with inter departmental processes. Some are industry specific, others are broad, broadly applicable. Some integrate directly into an ERP or supplier supply chain finance solution, while others are outsourced. All these solutions, improve efficiencies. So we’re talking about speed and accuracy when we’re talking about efficiencies here. So as the efficiencies increase, costs will decrease, file options for working capital or optimizing working capital increase. Having those options gives you flexibility, we talked about that briefly in the beginning, flexibility along those supply chain finance or cash conversion cycle, is going to be really important for an organization as things change. So you can see some solutions outlined on this slide here, we’ve got six items noted. AP solutions can significantly speed up the payment process reduces errors bolster security, in a high risk environment. We’ve seen significant increase in AP automation since 2020. It’s been a jump on remote work, many organizations are seeking to fully automate the AP process. Early payments can be helpful in the organization’s working capital and managing that it gives greater flexibility to calibrate especially when there’s changes that occur either those external or internal factors that we talked about earlier. For example, if the approval payments takes a long time to process and may result late payments late payments. Late payments can deteriorate the relationships that you have with your third party partners. So it’s important to not have that break down the supply chain. Speeding the process up though, through a solution opens up options. Flexibility, reduces headaches, improves the supplier relationships and strengths that strengthens the supply chain. Next slide. order to collect solutions. Market research in 2021 found that one in 10 accounts receivable departments considered themselves to be highly automated. Respondents want to more automation, with many wanting full automation, in order to collect process can speed up the company’s conversion to receivables and cash can decrease your costs, improve your customer relationships. Those relationships are really important, you can see a common theme here. Open up possibilities to calibrate your working capital. So it’s another option for calibrating working capital, which is an important component to your liquidity management. technology landscape is broad and includes the areas on this slide. In efficiencies across the areas can trap cash to drive up your costs. frustrate your third party partners in your customers is an example. Take a manual invoicing process, a company can take a number of days to invoice. The invoices have a high chance of being defective with manual process, the customer may customer may have to return the invoice for correction, the correction process most likely will take longer. This is gotta get back in the queue, somebody’s got to research it and fix it. This delays payment and cost staff time. On automation improves speed and accuracy. Sometimes by a significant margin. This can reduce the time cash is trapped creates flexibility and working capital adjustments and optimization. Next slide. Drivers to automation. You can see in here, these are some results from a survey that was completed. These are the top factors. What I find interesting in this is whether we’re talking about market research where suggests what drives AP towards more automation versus market research drives, more accounts receivable automation. They’re very similar. There’s only one item in here that is different from the other. And that is the forecasting accuracy and what we’re showing here, but they’re generally they’re they’re almost in lockstep in terms of order. And magnitude, which is quite interesting. So both AP and AR can certainly benefit from these automation solutions. And the research shows that efficiencies, cycle time costs, the reduction and errors, the exception management to control security, these solutions provide all these benefits along the way. And I think it’s I’d say it’s really interesting that their survey came out the same, relatively the same I should say.

 

Craig Jeffery  19:23

There’s a couple of things I wanted to jump in on that. And some of these are the surveys are what they are, you know, we don’t know always why people answered questions. We want to see efficiency, cycle time cost concerns, accounts payable, accounts receivable, a lot of these operational areas of finance are heavily challenged, charged and incented to be more efficient. The cost saving mantras is played regularly and consistently over time that may may bring up some of the reasons why it sits there. The more capital is us grassed over time, the bigger working capital considerations come up. And both of these are sort of at the bottom in these areas. And so and Treasury has a bigger role they’re pushing working capital considerations a little bit harder. But one item I would, you know, here’s my guess on one of them. Accounts Payable forecasting accuracy is setting forth at 41%. forecast accuracy for AR is number two it at just about 50%. Every month, they are asked to indicate what numbers they’re getting. They’re dialing for dollars, trying to get that money in. AP is all more flexibility on hitting your numbers since like, okay, we’re not going to be issuing any payments the last two weeks of the month, or the last month of the month, or month of the quarter, or some period of time. And so there might be a little bit more control there. But like you said, these are these are really interesting. similarities between the two.

 

Paul Galloway  20:56

Absolutely. Great comments. Great. Brian, I think we are up for our first poll question. And today’s poll question is, which of the following areas of the cash conversion cycle does your group have more responsibility over? Its multiple choice, he can pick more than one, treasury? Accounts payable, accounts receivable for not applicable? So when I think about this, Craig, from a treasury perspective, I can see all of these hitting it will be interesting to see how how people respond to this as if it’s going to be, you know, more even in terms of the numbers. I don’t expect to see really any not applicable, but there might be someone there.

 

Craig Jeffery  21:51

Well, maybe a banker, or someone, maybe a banker, or another consulting firm, may not have responsibility for that. But you know, over time, we’ve certainly seen the growth of Treasury, having increased play with accounts payable, accounts receivable, other elements of the cash conversion cycle, to help drive that as there’s been over time a general move in that direction, not a rapid move. It’s slow. It’s, you know, think of it in terms of one or 2% a year over time. So it’s this slow, secular trend have been responsible for over a period of time, not dramatic by any stretch. It’s more, not less, but it’s not dramatically more.

 

Paul Galloway  22:35

Yeah, the results came in Treasury no surprise was by far the bigger one. Counts payable or accounts receivables are about neck and neck at about 25% each. And a probably just a factor of who we have joining the webinar for not applicable. But if, folks, we need 100 people to type in poll into the chat box, and we will, I’m sorry, Craig.

 

Craig Jeffery  23:08

How about we make it SCF?

 

Paul Galloway  23:11

How about that? Okay. We’ll make it SCF. I like that.

 

Craig Jeffery  23:17

Anybody who typed in poll, you’re good.

 

Paul Galloway  23:19

Yep, poll or SCF, that’s fine. But we will send out the deck with the results on it. If we get 100 people to do that. We’ve got a couple more polls coming up here a little bit later. All right. Next slide. This is what we talked about, at the very beginning supply chain finance around kind of the traditional old model, the binary version, and one that is delinked. And so we’re going to step through these various aspects of supply chain finance and how it’s been changing over time. There are more multiple definitions of supply chain finance. Some are narrower, some are broader. Craig mentioned the Euro Banking Association definition that’s in the deck a few slides above, you can take a look and read that. Prior to the pandemic. Companies were setting automation goals for AP and AR. And the crisis, you know, really moved the timeline up. So the adoption happened a lot sooner. liquidity and supply chains remain an issue for many industries. Post the COVID pandemic event making the benefits of the cash conversion solutions highly desirable. So it’s pushing up the demand for for better solutions across or industry standards have shifted towards automation. Each company needs to consider their unique situations their needs their goals. recent innovation in artificial intelligence and machine learning and networks are lit lending power to an increase functionality, AI and ML texts, broader range of tasks off hand of busy staff. People that have many things they get done throughout a day. increases accuracy and speed. We talked about that earlier. It’s used for forecasting, cast application collections, payment security fraud detection. The networks themselves can streamline bolster counterparty management that will aid in the compliance track the payments that will find suppliers. They’ll prevent fraud vendor managed through vendor management, and validation of pay identity. important aspect, especially with the fraudsters continuing to adapt and find new ways to take money from organizations. Fraud Prevention is definitely an important aspect of these automated tools. During COVID, companies slowed down their payments to suppliers to protect liquidity. Oftentimes, suppliers have smaller liquidity reserves than buyers. Buyers resources, which in turn are in turn damaged supply chains. The traditional old inflexible lockstep supply chain creates a win win lose scenario when liquidity tightens for both parties, and a win lose can quickly turn into a lose lose. So nobody along the supply chain wins under that dynamic supply chain finance solutions, Applied Technology and innovations to create a win win scenario. That’s the link version at the bottom of the slide you see here. It breaks the lockstep of payment terms. It smooths out discount proration and the process that allows buyers and sellers to continue supporting each other during times of stress. Reverse factoring and dynamic discounting are examples of supply chain innovations that we’re going to talk about more depth on the next couple slides. Next slide. So reverse factoring, you can see here this gives a depiction of what reverse factoring looks like over a period of time. So reverse factoring tackles the lockstep with traditional payment terms that leverages the buyers credit to gain funding from a third party. Suppliers typically have lower credit than buyers, so buyers can use their credit to finance payments. In reverse factoring the buyer uses well I just said that sorry. In this this is in the form of an early payment from a third party. So it’s that leveraging the credit when the supplier submits an invoice to the buyer notifies the third party once is approved, the third party pays the supplier early at a discount. typically done prior to traditional payment terms. The buyer has a negotiated time to repay the third party allows the buyer to hold on to the Quiddity for a longer period. Next slide. Dynamic discounting dynamic discounting utilizes buyers excess liquidity to finance payments earlier to add a discount. Traditional payment terms offer discounts. Traditional payment terms offer discount options are limited though. They do not motivate the behaviors that serve the interests of both parties. So as an example, assume a payment term of 210. Net 30. So the supplier shortening the DSO by 20 days is favorable enough to offer a 2% discount. So as to 10, the buyer is often often unwilling to pay or able to pay a date 10. Past this day past day 10, there are no additional incentives to pay sooner. So 1112 13 all the way to 29 they’re unlikely to pay, they’ll probably wait until 30. At that point, this results in the missed opportunity for both parties. The dynamic dynamic discounting allows both parties to find a scenario that works best through the buyers supply chain finances supplier is able to set a sliding scale of discounts over time, the buyer is able to select the option that works best for them. No third party is needed for this approach. The payment terms are remained in lockstep, however, it allows for a graceful synchronization of lockstep there creates a win win for both parties. Now on the next slide, you’re thinking.

 

Craig Jeffery  31:12

Hey Paul, I wanted to say a couple things in here. So yeah, so you know, dynamics, some people don’t consider dynamic discounting part of supply chain finance. And we just refer to our bias of using the European Banking Association definition. But but you know, Paul, it said, had mentioned the length before, on the you know, on the payment side, you can pay later on the other party can receive funds earlier, by using third party credit, here’s the option of D linking it. It’s still linked, but it’s there’s a link to the discount. And you know, a lot of situations come up where not everybody can get an invoice approved in 10 days, or even 15 days, sometimes the processes are just too long. And so if you’re trying to collect funds sooner or a certain amount of funds sooner, you’re offering a certain discount, and you want a certain amount of money to come in before the end of the month, or just to ensure you have adequate liquidity. That may not always happen with you know, to 1030 or whatever the discount range is because you’re missing people’s windows. And they’re just going to hold to the till the regular term comes due because of that. And so this gives broader capabilities for adoption and helps organizations meet what they’re trying to do an organization that might be you know, cash rich wants to take advantage that discount. Yeah, so, great points. I’ll go to the next slide for you, Paul.

 

Paul Galloway  32:46

Great, thank you. So in this slide, what we’re depicting is the ability to use a hybrid solution. What makes this appealing, the use of dynamic discounting works for companies with excess capital, while reverse factoring allows buyers to support their suppliers by using their own credit to fund early payments. Companies may find themselves in a position where both approaches are available or work for them. 30% of companies fluctuate between the two so using both makes sense from a hybrid standpoint, the approach allows buyers to utilize or toggle between the two which offer flexibility when managing liquidity.  Next slide. Ithink we are up and ready for our next poll question. This is a two parter. The first part and second part are both multiple choice my organization uses of US supply chain financing, but I work for provider bank. Don’t use yet or no plans to use learning about it don’t use use and or stable in this adoption or use. Use and are working to grow the adoption SCF. Don’t use yet internet plan to use multiple choice so you can select more than one. The second one describe your SCF situation not applicable none of the above. Use a bank to provide SCF contemplating a bank provide SCF use the funding of FinTech provided SCF or contemplating a FinTech provide SCF. Think there’s a lot of options here, Craig, the poll kind of demonstrates that we have multiple places or areas that we can go to or third parties that we can leverage or FinTech, the driver solution. And I think we’re probably going to see a spread across these. I don’t know if it’ll be even, I’m not sure. We’ll have one that will pan out beyond the other one. But this will be interesting, multiple choices on both. And give just a couple a minute or so more for folks to respond. What are your thoughts on this gray? It looks like Craig’s computer crashed. So we’ve got technical difficulty. First question here. Looks like the majority of people use a bank provider and are interested in losing or learning about it. And a chunk of people don’t use it. Those seem to be the top three with the first question. The second question describing your SAF solution, not applicable None None of the above. So we’ve got a nun number of people that aren’t using the solution currently today. Of those using a solution. Bank providers seems to be the most commonly used or they’re contemplating using a bank provider. The FinTech options seem to be lower. Craig gets back on maybe you can make some comments around that. We’ll give him just a second here to get things reorganized. apologize for the technical difficulty, I think. I think we can see the slide deck again. And we should be able to is, is Craig back on, Brian? Okay, so Craig’s that back on, okay. Yeah, Brian, I can see I can see the questions. I can see the poll question for the slides. So I’m able to see that so when your supply chain finance with with the COVID pandemic coming out of it, I think people would have thought that perhaps disruptions in that pathway would would wane away, but we’ve had some geopolitical issues that have with continuous stress on supply chain. Craig talked about earlier the issues in Europe with the war in Ukraine. It’s been a big disrupter in Europe, but it’s also disrupted elsewhere. If you think about grain supplies coming out of Ukraine in all kinds of issue and disruption Russia has made creates quite a bit of that as a result of putting empty ships shipping containers and so forth out in the sea there off the coast of Ukraine it’s it’s also create issues not only with Europe and the supply, but it’s also created strain broadly across the world. It looks like we might have looks like we’ve got the slide back up we can move on to can we go to Brian Are we able to go to Okay, we’re on slide 15 Perfect. Perfect. Okay. Who needs supply chain finance companies with supplier relationships where the supplier suppliers credit is low. So the final suppliers credit is low utilized. SCF approach described will be beneficial. There’s a need to keep the supplier chain thriving while maintaining liquidity companies that want to optimize their working capital, it may be the working capital has been a priority and steps taken thus far have been ineffective and SCF option will provide options and flexibility To optimize your working capital companies, they experienced fluctuation that liquidity fits for organizations that have liquidity fluctuations between net positive net negative and times a positive liquidity excess capital can be used to receive discounts and pay suppliers sooner. In times of net negative liquidity and buyers credit may be used to finance early payments to suppliers. So keep everything moving forward and keep those relationships strong. Companies look into reverse access to capital. So you have an option beyond borrowing from your bank and increases the flexibility and control liquidity. And then there’s companies that may be facing change talked about change earlier. This is good for companies that are facing challenges such as rising interest rates, we have that happening globally. For expansion, difficult sales difficult collections, these solutions can help with that. It also allows to manage working capital and your supply chains more effectively. Next slide. So the future of supply chain finance when it comes to interest rates, interest rates through 2022 rows, and we’ve already seen indications that right rates will continue to rise. Although the recent SVB issue banking issues over in Europe, or maybe changing the outlook for raising rates, but rates have been rising. They are not always predictable. They vary from year to year and country to country. Credit as always easier to get for larger companies I have high credit ratings versus smaller companies with lower credit ratings. For small companies. This means they pay higher rates, they have less access to capital puts a strain on their liquidity and reserves. supply chain finance allows small companies to strengthen their supply chain and keeps buyers and sellers afloat during times of rising or volatile interest rates. Compliance KYC. This is a burden burdensome regulation for treasuries, or Treasury Department’s banks offer SCF also lists KYC is a big challenge. Cross Border transactions are often plagued by disputes and regional compliance issues. It’s difficult to resolve due to poor documentation. Many supply chain programs supply chain finance programs offer enhanced visibility and some offer documentation management. This will help clear up regulatory and or dispute resolution issues. networks talk about networks earlier. SCF solution uses network functionality to add value to buyers includes networks of suppliers and financers. The value the SCF grows as vendors improve the reach of their networks, emerging technologies. This increases the use of all Supply Chain Finance helps optimize payment strategy and discount terms. You can use historical data, current rates, you can the industry average for like DPO and DSO. To predict suppliers that will agree to the terms the blockchain DLT can increase transparency into the progress of the SCF transactions can improve the documentation, reduce confusion. It also allows for faster resolution. Craig, you’re you’re back on. You’re good to go now.

 

Craig Jeffery  44:31

Yeah, I just decided to rejoin. You can see I’m in a different location. I don’t know what happened. But I do want to apologize for that. But thank you, everybody for for joining us as we’re going going through this, both on Zoom and we’re also live streaming it to LinkedIn. So we’re trying to try some new things. Not sure if that was causing the problem or not. But we’ll we’ll figure that out. But thanks, Paul. I think that that brings us to our next slide, which is our final poll question.

 

Paul Galloway  45:00

The final poll question. These two questions are single choice versus multiple choice like the last group, my organization, text discounts, never sometimes usually, all ordinarily all the time, or I don’t know, my organization offers discounts, never sometimes usually all ordinarily all the time, or I don’t know.

 

Craig Jeffery  45:29

We have enough of the responses in the chat box, so no need to put those in there, you’ll get all of the responses. So thank you for doing that. Brian also pasted about our working capital and supply chain finance group on LinkedIn. And you’ll paste it again if people keep typing stuff in there. But that’s, after you’ve answered the poll question has hit submit, go ahead and click on that link. And join it. If you’re not a request to join, we’ll get you connected with our group on LinkedIn today. And we’ll be able to start sharing more information through that channel. So thank you so much for that.

 

Paul Galloway  46:09

Results are in we have a number of people for the first question, my organization text discounts, I don’t know about 40%. And it looks like across the board, another 40 50%, sometimes usually or all the time, small percent never do. And then for buy organization offers discounts. A large portion and again, roughly 40%, I don’t know. Almost the same for the other responses, it’s almost identical with a few more selecting never, but after that sometimes usually, you know, seemed to be relatively comparable to the one to the question above. So, you know, this kind of gives you some idea around, perhaps companies that are utilizing both sides of the coin are both processes for managing Supply Chain Finance, and helping manage liquidity and working capital. I think these, you know, there’s definitely some opportunity out there for people to continue to look towards automation, and ways that they can benefit both themselves and their suppliers or third parties that they have relationships with, through the use of supply chain finance. Great.

 

Craig Jeffery  47:42

Well, you know, how you you shared this slide before, where there was about it was 29% of companies fluctuate between having excess cash, and borrowing. And the level of cash you have may determine when you offer discounts. It may determine when you take discounts, and your need may be greater. And so maybe you’re offering different discounts over time. And so I think this, this touches to your point about companies are different. And your training partners have different cash needs. So the idea of some of the supply chain financing opportunities can take advantage of a much larger swath of your counterparties. If you’re looking to raise capital, extend your terms without destroying your relationship. So really good information. So the answers on these will be sent out to you with the deck. So thanks, everybody, for your engagement on this. And we’ll continue on to our summary slide leading practices, I’ll talk about a couple of the items on the left. So build a working capital council or act as a consultant in your organization for working capital Council, and this is a group that it may be set up for accounts payable receivable, maybe even inventory. Or it may be there’s a council focused on payables or the order to pay process or order to collect process where there are measurements that are shared, the goals for the organization are communicated clearly. And together, you’re working on setting those goals and achieving those goals and reporting on that. So there’s a lot to be said for that. Significantly less than half the organizations have those in place. But those that do tend to get more significant performance out of their organization and the cash conversion cycle and their goals for working capital. The other the other aspect of that too, is we talk about KPIs and getting those aligned. You can have competing KPIs, someone can set a goal that’s about efficiency in one area that doesn’t really care about the capital side of things. I have another area that’s concerned, maybe procurement is concerned about getting the best price. And so they’ll buy way more inventory than is necessary, because they’ve secured a better price. And that’s their measurement. And so their KPI is at odds with, you know, having the right amount of inventory, the right amount of capital tied up in the cash conversion cycle. So that’s where this general education and discipline group can come in. That’s a key key area for, for those on the bottom, we have KPIs and objectives for initiatives. And that’s where that’s really extending what the purpose of a working capital Council is, is to drive the right behaviors, make sure people are handing off their activities to another department properly. And then setting those KPIs and objectives for the various initiatives that you have. That creates alignment and common understanding. And those are two of the key leading practices. No, no great company ignores working capital. And every every good, every well managed company looks at the efficiency of the process, and how their capital is tied up and freed in the organization. So there’s, it’s not are we efficient in our processes? Do we minimize the capital we have tied up in there? But no, it’s? Are we optimizing it? And are we creating an organization that can scale both of those are important for growing and changing organizations?

 

Paul Galloway  51:39

Thanks, great. So understanding the various perspectives, you know, each area within the company has their own goals. Craig alluded to, you can have competing KPIs. These are created, sometimes unintentionally, to mean to have compete competing KPIs, but organizations can have those and when they’re competing against each other, you know, hurts everyone. So you did hurts organizational efficiency, working capital, in, you know, the inter departmental relationships, so, so getting those KPIs to be honed in and common across the board, so that they’re not competing, but they’re working together in lockstep. That helps the organization manage organ capital and other projects more effectively. So there’s this idea or this concept of creating a working capital Council. The Council should focus on weeding out competing KPIs, they need to understand each other areas concerns, and what their goals are, and to help them understand other areas goals as well, that will help them get the common understanding. So to gain more alignment and a single set of KPIs versus competing. There may be areas that are not represented on the council with valuable perspectives. So you got to go outside the council at times to get those perspectives to make sure that you have effective KPIs and that people’s voices are heard. So, when you think about this, communication is really key to provide context and understanding. Down below, when we think about monitoring the refining the approach, we talked about this earlier, the monitoring of the systems, the supply chain finance, the working capital, the cash conversion cycle, you have to monitor these things because they do change over time due to changes either internal or external factors, which we talked about economic but we didn’t make any reference to there could be acquisitions. So So organizations that have cyclical or seasonal sales, these all have impacts and put pressure on working capital. Working capital needs to be reassessed on a regular basis, at least quarterly if not monthly. To discuss, you know, at a minimum just to discuss how things are going, find out what could be better and to recalibrate and get your supply chain finance or working capital or liquidity management in a better acquisition to manage your business on a go forward basis. With that, we’ve got one final slide here. Just a couple of closing comments, I’ll hand over to Brian. The cash conversion cycle is an important aspect of treasury supply chain finance provides treasury, the opportunity to optimize working capital as well as the flexibility to affect the effectively managed liquidity along the supply chain. Using the tools described into in today’s webinar, an organization manages their supplier and third party relationships as the environment changes around them. So with that, I would open up to any questions people might have, we still have about five minutes. So we do have opportunity to answer questions. And Craig or Brian, I don’t know if you have any final comments while we wait to see if any of our participants may have some questions that they want us to answer.

 

Craig Jeffery  56:16

Yeah, just thanks for everybody’s attention. There’s the in the chat box, you can see where to download the report is click in there and get it up on the screen. You can also see the vendors that participated in the analyst report in the supply chain financing and cash conversion cycle area in this last years. The most recent analyst report, so please take advantage of it read the section in some detail. Paul, thanks for taking care of that bringing us in on time. And Brian, you have a few things to say.

 

Announcer  56:56

Well, thank you, everyone for joining us today. The CTP and FP&A credits, today’s webinar slides, and the recording of today’s webinar will be sent to you within five business days. And be sure to download as Craig mentioned, the Treasury Tech Analyst Report by clicking the link in the chat box. Thank you and we hope you have a good rest of the day.

 

Paul Galloway  57:20

Thanks everyone. Thank you.