Throughout my years in order-to-cash, I like to think I’ve seen it all. I’ve been in the order-to-cash space in various roles, including running my own accounts receivable (AR) team at a Fortune 500 company for several years. My background includes everything from payment processing, credit and collections, accounts payable, procurement and treasury. And for the past 10 years, I’ve been working as an AR automation evangelist offering solutions in the B2B order-to-cash space.
I have navigated recessions, industry booms and busts, and even a global pandemic.
As we emerge from the fallout of the global pandemic, finance teams have a new set of challenges to navigate. The difference this time, I believe, is the number and types of challenges teams need to be addressing at once. Soaring inflation, continued supply chain disruptions, and a negative global economic outlook are all quite challenging on their own. But now, finance leaders are struggling to solve revenue challenges and protect their cash, while defending themselves against this unique and unprecedented economic environment. Needless to say, it’s an interesting time for order-to-cash.
In this blog, let’s break down the top trends that will influence order-to-cash in 2023.
Inflation & the Cost of Capital
As companies start to go through 2023, they’re going to see that inflation will reverberate across the economy and their buyers. Times of high inflation are scary for credit managers. Higher interest rates mean businesses are retaining less revenue, which places a major strain on cash flow. Your “good” customers may start to struggle and seek longer payment terms. Your bad debt will start to creep up. In 2023, organizations can’t afford delayed cash collection or lost revenue, and it’s just going to make cash flow that much more important.
Hiring and Retaining Talent
In a survey published by Gartner in September 2022, 54% of respondents said hiring and retaining talent was the most selected difficult task facing CFOs over the next 12 months. Thanks to the COVID-19 pandemic, many industries struggled to hire and retain their staff amidst the Great Resignation. Finance was no different. In 2023, finance leaders shouldn’t just see digital transformation as a means for replacing people, but as a great employee retention tool. This view is very different than the traditional efficiency-driven, people-replacing approach across many industries. Digitalization is about sparing employees from repetitive, tactical tasks and having them focus on activities that are much higher strategic value.
Confidently Forecasting & Predicting Cash Flow
My colleague at Sidetrade recently talked about 3 CFO Tips for Freeing Up Cash, Fighting Inflation, where she discussed how now is the time for finance teams to engage in more impactful strategic planning and risk management, anticipating and preparing for what’s next beyond inflation. The pandemic made the value of proactive forecasting manifest, and now inflationary concerns are pushing CFOs to shift priorities and become less transactional. It’s time for teams to move away from only historical reporting toward more accurately forecasting future trends.
Consider Sidetrade customer, Insight Enterprises, a Fortune 500 global IT solutions provider. Their existing solution was unable to provide full global visibility into their cash flow, nor unify its data to support critical financial decision-making, which was identified as imperative in scaling business and financial operations to meet their aggressive growth goals. The more accurately a firm can predict its cash flow, the more aggressively it drives down DSO, increases working capital and scales for growth.
Finance Transformation, Data, & Technology
In our recent blog, The O2C Finance Transformation Roadmap, we identified the growing need for finance organizations to be agile. For example, external market forces such as inflation and supply chain fragility has led many CFOs to consider how their organizations can be more streamlined, responsive and dynamic.
Confidently forecasting working capital and cash flow also means investing in the right data sets, and the right technology to analyze those data sets. For example, let’s talk about moving from predictive analytics to prescriptive analytics. Predictive analytics identifies “what might happen,” while prescriptive analytics uncovers “how can we make that happen.” Developing the data and insights that is focused on where the organization should go, rather than where it has been, is key right now.
These competencies become a competitive and strategic advantage, and the finance function has a key role to play in delivering efficiency, insight and value to the business via simplified and standardized processes, a highly skilled and technically savvy workforce, a foundation of innovative and enabling technologies, and empowering your team with data-driven, actionable insights.
Removing Uncertainty in 2023
What is the bane of financial leaders? Uncertainty. And if 2023 had a single theme, it would be uncertainty. Nevertheless, Sidetrade is here to help you navigate 2023 with confidence. In the meantime, here’s our advice to financial leaders: continue to fund the right digital growth bets, implement technology that streamlines processes via automation, and empower your teams with data-driven, actionable insights.