Almost half (45%) of UK financial heads say that they are more likely to extend the terms for supplier payment now than they were 12 months ago, according to research by Basware. As the credit crunch renews its grip on UK businesses, Basware’s ‘Cost of Control’ research report also reveals that just over half (54%) of those surveyed state that a key objective for 2012 is to reduce the number of debtor days on outstanding payments – with 36% saying that they are more likely to use discounts in order to incentivise early payment from their customers.
“The increasing tension between seeking to get cash in early and sitting on your own financial obligations for as long as possible shows that more and more businesses are concerned about their cash flow position and liquidity,” said Andrew Jesse, vice president at Basware UK.
In line with this concern over cash flow, financial directors and chief financial officers (CFOs) in the UK are some of the least confident in their own company’s performance (UK – 37%, international average – 51%). This is despite UK finance chiefs having the greatest confidence in the world economy, with 34% positive about the world economy compared to a global average of 26%.
The research revealed some alarming statistics about the state of visibility and transparency of financial obligations and cash movement. Less than half (44%) of UK finance heads are confident that there is a ready understanding of cash flow and invoicing status within the organisation, and only 42% are positive about the visibility of cash within their own company.
“This lack of visibility into cash flow and financial obligations is undermining business confidence and is likely to cause the implementation of panic stricken financial and procurement strategies,” said Jesse. “In the face of the continuing economic challenges and anxiety around a fall out of the eurozone and banking liquidity, many businesses will be seeking to build a cash buffer to relieve their cash flow anxieties. Building this buffer, in many cases, will involve passing the financial buck onto suppliers. As we saw in 2009 many small and medium sized businesses, with healthy order books, can fail because of cash flow woes inflicted by large companies setting the agenda.
“Greater visibility into cash flow and invoicing status can help to improve a business’s confidence in building their financial and procurement strategies and improve its agility in dealing with cash flow issues. Whilst utilitarian financial strategy may not be something previously associated with big business, but when it’s a symptom of improving your own cash flow visibility, it can only mean good things for the UK economy and for supplier relationships,” he added.
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