Managing Cash Flow in Times of Crisis

SAP Executive InsightLeadership in Times of Crisis: A Series
MANAGING CASH FLOW IN TIMES OF CRISIS
SOLUTIONS FOR IMPROVING CASH AND LIQUIDITY MANAGEMENTCash is the lifeblood of any business, and with the turmoil in the financial markets, many companies are struggling to ensure the cash flow and liquidity needed to maintain normal operations. Once primarily the domain of cash managers and treasury managers, today's critical cash-flow and liquidity concerns are demanding executive-level attention.
With credit restrictions and an overall decline in demand for most goods and services, chief financial officers are witnessing business drivers change from sales growth to liquidity coverage - and from return-on-capital-employed to cash-to-cash cycles. Now, liquidity flexibility must be protected first and foremost. Long-term goals will not be achieved if short-term liquidity obligations cannot be met.
Against this backdrop, most companies must increasingly depend on their commercial cash flows to sustain operations. This has critical implications for executives across all industries and geographies. By answering the following questions, this SAP Executive Insight explores specific actions companies can take to ensure high cash-flow velocity and vital liquidity: . H ow can I protect the health of my commercial cash flows?. H ow can I gain better visibility into sources and uses of cash?. H ow can I increase control over my global cash balances?
2 SAP Executive Insight - Managing Cash Flow in Times of CrisisEXECUTIVE SUMMARY
AT A GLANCE
Protect Your Cash and Liquidity Leadership Makes the Difference paring the actual performance of With the global economy in crisis, com- in Times of Crisis companies across a wide range of panies are seriously challenged to main- sizes and industries.tain desired profit margins and generate One thing is for sure: with every eco-the cash and liquidity required to fund nomic crisis comes opportunity. Some SAP conducts benchmarking and normal operations. There are strategies, companies will go from good to great, best-practice studies in many busi-however, that can help you cope: and others will just fade away, making ness areas. Analyzing the perfor-. Ensure healthy cash flows. Because room for more innovative competitors. mance of industry leaders offers it is the company's primary source of To be among the winners, executives executives the metrics needed to cash, you must manage your ac- should strongly consider best practic- assess their own company's past counts receivable to make sure that es that provide a balanced approach successes and guide today's crucial the amount and timing of critical cash to moving forward by including both decisions. For example, benchmark-flows are not compromised. For cost reductions and smart invest- ing reveals that companies with the example, you can accelerate the cash ments. SAP has developed a series of capability of making real-time credit conversion cycle with process Executive Insights that highlight strat- decisions have on average 40% low-improvements that streamline the egies your business can use imme- er days sales outstanding (see the receivables cycle. diately to run more efficiently and figure). In addition to financial best . Gain greater visibility into the improve the customer experience - practices, executives would be well sources and uses of your cash. even in today's economy. advised to consider the efforts in Get a complete view of your entire recent years to optimize the physi-financial value chain. The resulting Benchmarking - The Facts of cal supply chain. Cash cycles have insight can improve your ability to the Matter similar upstream and downstream forecast cash and optimize overall implications.cash management. The insights presented in this paper . Increase control over cash on hand. are based on decades of experience For more information about the SAP® Manage the cash you have to provide in helping our customers become benchmarking and best-practices maximum value for your business. best-run businesses. An important program, visit www.sap.com/usaSuch control, however, is particularly tool in these efforts is the understand- /solutions/benchmarking or contact challenging for companies with global ing gained from measuring and com- benchmarking@sap.com.operations that have cash balances fragmented across many banks in dif-ferent geographies. G... [download for more]