Digital Trend & Solutions

Can Supply Chain Finance become strategic for CFO?

In the current economic and financial context, the CFO (Chief Financial Officer) role is becoming increasingly strategic within the company, expanding its breadth and shifting from company finance expert to strategic business partner with comprehensive knowledge of the company.

A change driven be the introduction of Supply Chain Finance within the company, which requires the CFO to broaden their vision to include the supply chain promoting, for example, the consolidation of strategic relationships with suppliers, naturally resulting in greater supply efficiency.

Today, among the most widespread priorities in CFO agendas is providing decision making support through the use of advanced analyses enabled by digital transformation, followed by strategic and emerging operating risk management. This change, however, makes it necessary to broaden the competences demanded of the CFO: they will be increasingly required to be able to work more in synergy with other C-levels, to analyze and convert business insight into data for the CEO and to facilitate business innovation and transformation.

What emerges is the strong interest for technology innovation matters, as of cost reduction and organizational efficiency themes. It’s interesting how, in order to locate financial resources, CFOs indicate operational business management actions as a priority: streamline costs and net operating capital through new sales agreements with clients and suppliers and divest non-performing assets. Consistently with these action guidelines the CFO intends launching dematerialization initiatives in the finance and control areas, Supply Chain Finance and develop Business Intelligence and Analytics systems. In financial terms, the CFO pursues financial flow optimization goals and freeing up liquidity through an increasingly “cash-flow oriented” approach.

Interesting ideas emerge when considering, for example, Dynamic Discounting, one of the most innovative Supply Chain Finance solutions available today, consisting of using available liquidity to dynamically and competitively offer to pay some suppliers in advance in exchange for a discount. Companies such as Coca-Cola, PayPal, Hallmark, Salesforce and Warner Bros Entertainment have automated the invoice settlement procedure to promote discounts from suppliers. This way of using solutions not only fosters productivity and cuts costs – replacing practices and negotiations that are no longer relevant – but also enables CFOs to accurately plan cash flow operations based on liquidity and business goals.

In this context SCF can therefore become strategic also to the CFO. The outlook on the supply chain naturally promotes and increases collaboration between functions enabling early detection of important signs without waiting for the publication of budgetary data. Solutions such as Dynamic Discounting enable to harmonize and improve financial flow management, optimizing liquidity and providing a value added service for supply chain members. Only by better understanding the company’s supply chain – eliminating historically rooted functional barriers –CFOs will be able to leverage cash flow management economic-financial benefits at the base of a broader competitive advantage development strategy.

by Claudia Cervatti, researcher, Supply Chain Finance Observatory

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