Study: 85 Percent of CFOs Expect Digitization to Improve Cash Flow, Profitability and Revenue
Thursday, March 25th, 2021
Available for download here, the study authored by Zach Zacharia, Ph.D., Director of the Center for Supply Chain Research at Lehigh, is based on both survey data and interviews with 125 North American-based CEOs and CFOs at organizations with an average of $150 million in annual revenue. Among its top findings is the idea that more than 85% of C-level executives expect digitization efforts to enhance cash flow and reduce Days Sales Outstanding (DSO).
"Throughout this study, we have taken an in-depth look at supply chain collaboration and digitization, covering many different aspects such as when revenue is initially recognized, integration efforts with customers, suppliers, and banks, and even companies' stance on electronic payments," Zacharia said. "While many companies have made great strides toward improving their supply chain processes, this study has discovered that companies still face many physical and financial challenges. After analyzing the data collected, we concluded that none of the respondents are entirely satisfied with their digitization level and all the respondents believe that the investment in these projects would be of significant benefit to their corporate bottom line."
A look at some of the other notable numbers in the study:
- 95% of manufacturing companies surveyed have initiated a process to digitize the purchase order engagement activity with customers. The same percentage of respondents had started their journey to digitize invoices sent to customers.
- Companies whose supply chains are not fully digitized have buried manual data entry activity in numerous departments throughout their organizations, revealing that very few companies have a true understanding of the actual cost associated with the manual data entry processes.
- The average annual cost tied to manually entering data into ERP and back-end systems was over $1 million.
- Over $600,000 was the average annual cost associated with manually entering invoices from suppliers.
- 40% of buying organizations pay manufacturers digitally.
- 80% of the respondents said they would increase their cash forecasting frequency if reconciliation times were improved.
- Nearly 1/3 of the respondents would aim to move from monthly cash forecasting to weekly cash forecasting if the process were more digitized.
"We frequently only think about a physical item and the delivery of this item when we consider the 'supply chain,'" said Steve Scala, Executive Vice President of Corporate Development at DiCentral. "However, a supply chain encompasses all the individuals, organizations, resources, operations, and technology involved in supplying a product or service to a customer. In this research, we not only looked at the physical supply chain, but also the financial supply chain, and the interaction between the two. The importance of understanding this impact is underscored by the frequency by which investors and external appraisers base company valuations on the financial performance of key metrics and ratios."
Download the study at https://go.dicentral.com/downloads/lehigh-study-finance.