How can businesses improve their cash flow?

First and foremost, optimise your accounts receivable. Because without cash coming in, your business is not viable of course. The more you can reduce your Days Sales Outstanding (the time waiting for payments), the better your financial situation will be. Try to negotiate a down payment when starting a project and be very clear with your customers about payment terms and key milestones at which cash should be received, and make sure they understand the consequences of what will happen if they don't pay on time. For example, if our customers take longer than agreed to make a payment, our contract gives us the right to put on hold their projects or, in the worst case, to stop it. We’ll always try to negotiate and understand their position first though, as you never know what is happening in their business.

Alongside this, you need to be smart with the stock you hold and manage your inventory efficiently. When finance teams work hand-in-hand with commercial teams, it becomes easier to prioritise the high-stock items and make sure that these are sold first. Prioritising high-stock items will also help to maximise your turnover.

When finance teams work hand-in-hand with commercial teams, it becomes easier to prioritise the high-stock items and make sure that these are sold first. Prioritising high-stock items will also help to maximise your turnover.

What can businesses do to reduce external risk factors?

There will always be some level of economic uncertainty in the world, and if you want your business to be successful then you have to minimise the risk from external sources. The first area of focus when aiming to minimise risk should be within your supply chain. Any external stress, no matter how big or small, on your suppliers can impact the price you pay for raw materials. This is why you should always have alternative suppliers ready to go, otherwise you are bound to the success or failure of your suppliers. Make sure that your alternative suppliers are of a similar size to your current ones, because if your main supplier suddenly fails unexpectedly, you will need them to pick up a lot of work in a short amount of time! Similarly, you should try to carefully manage your exposure to high-volatility currencies across your supplier base.

It’s also important to make sure that your customer base is diversified, both in terms of market segments/industry and geographic locations of your customers. In the same way you shouldn’t rely on a single supplier, you should also not rely on a too concentrated customer base. No matter how good your relationship with them is, you'll never really know what's going on in their world. If they find themselves in a period of uncertainty, from external or internal factors, then there is a risk of bad debt occurring that can put your business in danger.

You should always have alternative suppliers ready to go, otherwise you are bound to the success or failure of your suppliers.

Should finance teams embrace digitalisation?

Digitalisation is happening across all areas of business, and finance is no exception. Digital transformation can bring lots of exciting opportunities for finance teams and although the change can seem daunting at first, the benefits are well worth it. The most exciting thing is that the benefit of digital transformation is not a one-time occurrence, it is an ongoing process that brings more benefits as you go.

The efficiency gained through digital transformation allows you to make smarter decisions, and in particular allows you to automate many of your smaller tasks. As your learning increases, you will be able to automate more and more smaller tasks to continually improve your efficiency. With the elimination of low-value manual tasks, your focus can be shifted onto high-value tasks and advisory work where your expertise and experience are more useful to the business.

The most exciting thing is that the benefit of digital transformation is not a one-time occurrence, it is an ongoing process that brings more benefits as you go.

Sylvain Frachet

Commercial Finance Director

The most exciting thing is that the benefit of digital transformation is not a one-time occurrence, it is an ongoing process that brings more benefits as you go.

Sylvain Frachet

Commercial Finance Director

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Schneider Electric's purpose is to empower all to make the most of our energy and resources, bridging progress and sustainability for all. They drive digital transformation by integrating world-leading process and energy technologies, end-point to cloud connecting products, controls, software and services, across the entire lifecycle, enabling integrated company management, for homes, buildings, data centres, infrastructure and industries.