Cash is king, credit is scarce, and stubborn clouds of uncertainty refuse to dissipate. In this time, maintaining a strong balance sheet and an eye on cash flows is a prerequisite for business leaders seeking to master the twin near-term imperatives of viability and maneuverability.

Scrutiny on money flows outside the four walls of a company, and in particular, within the supply chain, is increasing. A new breed of solutions and processes involving working capital management, and new providers that deliver it, are seeing greater demand.

Companies building the future of commercial payments are starting by getting the basics right. A strong foundation for payment optimization demands that paper-laden payment processes be upgraded with more agile, more robust and more scalable XML-based equivalents. Equipped with a more streamlined corporate fuselage, electronically enabled companies and their supply chain partners may then take advantage of far more dramatic working capital and cash flow efficiencies - to their mutual benefit.

To drive these changes, companies are increasingly making investments in technology-based solutions across the following areas:

1. Procure-to-pay and order-to-cash: Technology can streamline and automate these cycles, reduce legacy and burdensome paper-based systems, increase visibility and improve efficiency. Net result: buyers pay smarter, their suppliers see approved invoices faster, resolve disputes better, and enjoy far greater certainty of payment.
2. Trading partner collaboration: Companies are turning to business networks to fuel greater collaboration and rapid time to value in their commerce initiatives focused on cashflow and payments. No longer in their infancy, such networks deliver far better value and remove the burden of in-house “do it yourself” deployments. They also have the virtue of reducing multiple supplier efforts as well: suppliers can go to one place to reach multiple customers.
3. Working capital management: Armed with a platform that turns invoices into payables/receivables more quickly than ever before, trading partners are able to take advantage of new opportunities to remove inefficiency in payment flows themselves - to build a win-win result. Payment discounting solutions, p-card solution integration, direct receivables financing and third-party supply chain finance solutions all combine to provide a powerful toolset with which the modern corporate may optimize cash flow and operations, as well as mitigate supply chain risk for suppliers who are facing the same economic challenges as their customers.

In today’s economic climate, the appetite for major, multi-year, ‘behind the firewall’ ERP software installs or upgrades has decidedly waned. Increasingly, those seeking to increase technology investments are looking to alternative models such as Software-as-a-Service or “SaaS” solutions for such solutions, as they require no additional hardware, software or resources to manage and enable companies to maximize their existing technology investments. In addition, companies can pay for the technology they need as they need it, get started fast, and dial up or down the resources required.

Building the future of commercial payment platforms today involves more than just technology, however. Optimizing working capital within the supply chain involves a laser-guided focus on money flows and supplier relationships. Necessarily, the treasury function merges with the modern corporation’s supply chain role to create new practices and approaches. Success in working capital management initiatives requires recognizing that value calculated on Excel worksheets can only be realized with the help of excellent supplier relationship practices: treasury and procurement need to work together to get it right. And with the right solutions and processes in place, they can.

In an era where cash is king, dollars spent to protect and enhance the commercial payments “monarchy” are not only prudent - but required. By investing now in technology-enabled solutions and processes that enable them to more effectively manage their working capital, companies can manage the challenges inherent in the New Normal and position their organizations to compete strongly when economic conditions truly improve.

Peter Lugli is Senior Director, Working Capital Management and Business Development, for Ariba.