We asked Chief Execs: what should the business focus on in times of crisis? – Keep Liquidity Going

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As we wrote earlier this week, here and here, Spend Matters’ analysts and editors are well placed to hear from the market about what would really benefit the business in times of crisis and uncertainty, and from vendors about what they can offer to help.

We are hearing that, more than ever, Procurement is being relied upon to produce answers to some difficult questions under difficult circumstances. Procurement’s many strings are being plucked, sometimes for the first time, by people in the organisation looking for solutions, tapping into the facets of procurement they hadn’t used before.

Any crisis forces organisations to look more deeply, and probably for the first time in a long time, at their processes, risk management, analytics and sourcing backup plans. We expect there’s a lot of firefighting going on in the workplace right now, and the business needs help from Procurement basically to keep things running as smoothly as possible. Procurement is in a great position to do that, with its cross-functional way of working with the business units, whose needs it understands, and with its knowledge of the market.

We spoke with Christian Lanng, who is CEO and founder of B2B network and spend management platform, Tradeshift. Christian also sits on the Covid-19 World Health Organisation business response task force which focuses on three things specifically: the biggest impacts on business, what can be done to mitigate them and how we facilitate a speedy recovery once this crisis is over. Tradeshift has also launched a COVID-19 Relief Initiative -- a not-for-profit  marketplace to match suppliers with medical institutions in need of equipment during the crisis.

Liquidity is key to business continuity

“While we are in a mass structural economic crisis,” he told us, “with unemployment, bankruptcies and liquidity shortages, none of the assets are going away. As the 2008 global financial crisis taught us, the massive pull back on global liquidity strategies likely did more damage than the global crisis itself, because hundreds of thousands of suppliers banked on it. So during this crisis the message is to honour that liquidity flowing through the supply chains, which is crucial for payment flow which can significantly improve the working capital base. Governments are therefore issuing response packages to companies, realising the damaging effect on supply chains.”

He sees focusing on liquidity as the priority at the moment, because “it means we can protect as much of the infrastructure of companies as possible so that businesses will be able to pick up again and return to profitability.”

But he points to one physical operational issue that will slow the return to economic stability. Many firms, despite having invested in the digital space, are still massively paper-based. The dichotomy is, while we can work from home and continue our business uninterrupted because of all the amazing infrastructure we have, our shared service provider cannot. The many thousands of paper invoices that are delivered to businesses around the world cannot be opened, scanned and processed – the AP options are limited. This means that a huge chunk of physical infrastructure just stops. A massive pile of transactions sits there, and none of those transactions can benefit from the liquidity in the supply chain because they’re not being processed. If suppliers don’t get paid, the supply chain doesn’t function, and neither do the businesses it touches. So right now, he says, “we have a window of opportunity finally to connect the supply chain digitally.”

It is timely, although an unforeseen timeliness, that Tradeshift has been working on and has just released Tradeshift Engage, an engagement platform designed to build digital collaboration between suppliers and buyers – a move away from the buyer-centric onboarding process. According to the press release Engage “promises an end to the form-filling, data integrations, portal wrangling and data discrepancies that so often derail large-scale supplier onboarding initiatives.”

Given the damage that non-actioned paper transactions can cause to the supply base and its stakeholders, Tradeshift has seen a massive surge towards digital from its customers in the past few weeks. “Many firms are opting to go fully digital, even for the short to medium term, as investment in digital is moving from being a tactical and cost issue to a strategic one,” he explains. “Correspondingly, on the seller side, we have also witnessed a massive move towards supplier invoice onboarding, because liquidity continuity cannot be guarantee if you are transacting in paper invoices that never reach the system.”

But it isn’t just the supply chain that needs this liquidity, it is important for the workforce too. Early pay programmes for salaried workers is a growth area, and new solutions are coming into this space, as well as Tradeshift, offering access to pay per days worked as opposed to at the end of every 30 days.

It is interesting that often a crisis can trigger a change in mind-set. Those firms that questioned the cost versus the benefit of digital P2P, now see it as essential to survive. For this reason, Christian sees liquidity as the biggest priority facing business continuity at the moment to get strategic goods moving through the supply chain without sacrificing the balance sheet.

The second priority he sees is to look at how we can eliminate any tactical and strategic risks in our operations, we must consider: can we work completely from home, what is the risk perceived from a shared service perspective, and are we in a position to deal with a second wave of the pandemic?

“Procurement and sourcing strategies, however, take longer to impact and are of less importance to most firms at the moment,” he says, “as supply chains are shutting down. If we start to look at prices and negotiation, while there is some leeway, getting better financial deals from the supply chain just increases risk in the longer term.”

“So our core mitigation strategies at this time of crisis must be supply chain liquidity, payroll solutions that help the employee and don’t impact the employer, and digital operations. These are the faster-to-deliver mechanisms that will make the biggest impact.”

“Who knows,” he offers, “we might look back at this moment as the time when the world stopped using paper invoices.”

First Voice

  1. Benard Odote:

    Cash is KING

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