Getting Buy In For Your Project Means Understanding Who Is Holding The Cash!


Companies are hoarding cash because interest is at historic lows. This has created a liquidity problem and risk in the supply chain. Suppliers have liquidity problems due to tight credit markets, which introduces significant risk.


  • 80% of invoices are paper
  • 23 days to approve an invoice
  • 70% of discount opportunities are missed
  • 30% of invoices have exceptions costing $600K for every 100K invoices
  • Low interest and tight credit supply chain risk



How are other companies benefitiing?


  • Manage payables, cash, and DPO with greater precision, control, and visibility
  • Maximize returns and reduce investment risks on your short-term capital
  • Enforce pre-negotiated contracts and discount terms established by procurement
  • Optimize discount penetration across targeted suppliers, spend, and invoices
  • Strengthen supplier relationships and their financial stability with innovative tools offering greater cash visibility and liquidity

With Ariba Working Capital Management Solutions, the world’s largest sports equipment company:

  • Increased early payment discount capture from 35% to > 90%
  • Increased supplier discount participation by 20% and average discount to 1.5% (24% APR)
  • Captured dynamic discounts on 4% of targeted spend


What is your companies Working Capital Strategy?
During the downturn, most CFOs and treasurers followed the playbook: they accelerated cash collections, extended payments, and unloaded inventory as fast as possible.


As a result, cash levels of the S&P 500 soared. Many CFOs found themselves hardā€pressed to explain to their boards how they planned to aim those hoards of cash at growth opportunities. Others wanted to use their cash piles to pay off debt, but because they continued to worry about future economic shocks, they hesitated. Meanwhile, with money markets paying only 25 to 50 basis points for parked cash, the pressure intensified.


Looking internally, three out of four CFOs and treasurers told us they did not trust their cash flow forecasts. Some had only a loose grip on impending cash commitments. Others were uncertain how much default risk and slow payment risk lurked in their receivables portfolios. Some voiced private concerns that they could not completely rely on banks to fund sales and operations.

A stark lesson was delivered: Cash is a cushion in times of turmoil, but its value is limited when you don’t have reliable information about cash flow drivers or plans to use that cash in economically efficient ways.
Source: White Paper - Working Capital Management: New Strategies for Maintaining Financial Strength through Economic Cycles


Reasons for Missed Discounts
Q: On a scale of 1 to 5, where 1 is the lowest and 5 the highest, rank the reasons for your organization’s late payments and missed discounts.

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Source: Electronic Invoicing Benchmarking 2010


With these Ariba’s innovative working capital solutions, you gain valuable business advantages that include:


Increased Efficiency, Greater Accuracy, and Lower Costs

Automation eliminates slow, error-prone manual processes, accelerating the entire capital management cycle and saving time and money for you and your suppliers.


Greater Liquidity and Higher-Yield Returns on Short-Term Cash

By automating your payables and setting up early payment discount programs with your suppliers, you realize a much higher return on cash compared to extending payables and earning interest on the float.


Reduced Supply Chain Risk

Ariba Working Capital Management solutions provide many ways to remove high borrowing costs and significantly reduce risk in your supply chain.


High Supplier Adoption

Convenient self-service features and a simple user interface make Ariba Working Capital Management solutions easy for suppliers to use, maximizing their participation and incentive to transact with you over the Ariba Network.


Previous: Working Capital Management, Why Your CFO Cares! (Pt.1)




Beverly Dunn is a Customer Success Manager with Ariba. All customers are invited to join the private Customer Success group on Ariba Exchange, where you can access the Customer Success   Spotlights, Lunch 'n Learn Webinar calendar and replays, and the Ariba    Knowledge Nuggets.