More than 60% of CFOs report not having complete visibility into their company’s transactions. The supply chain—the backbone of their businesses—remains a puzzle, and one that is missing some pieces.
This lack of visibility can be hugely detrimental to organizations. If CFOs can’t see the transactional layer of their businesses accurately, the truth of their cash flow is unpredictable. This allows gross working capital to build up, leading to a capital ratio that is too asset-heavy. When a company has a build-up of capital such as this, without the visibility to see all the moving parts at once, money gets stuck in the pipes. The company is not able to invest properly or grow to its full potential.
Even worse than a foreseen supply chain disruption is an unforeseen, unexplained one. It can kill an earnings call, and a company simply can’t maintain an accurate view of the health of its supply chain if it is only seeing in siloes and sections.
Why Do CFOs Lack Visibility Into Company Transactions?
CFOs see the world through three financial statements: balance sheets, cash flow statements, and profit and loss statements. Although these three “frequencies” of financial flow provide different perspectives on how businesses operate, they are merely standardized models. The result? A truncated view of transactions.
Additionally, most CFOs rely on functional business units to manage parts of the individual supply chain, running on the assumption that once everything aggregates, the profits will, too. However, between business units, inventory buffers and stockpiles creating pockets of working capital, you will begin to saturate warehouses, trucks, yards and other long-term assets. In turn, this will cause artificial supply chain bottlenecks to stop profits from coming in.
It is clear, then, that visibility is more than just a nice thing to have. Ultimately, cultivating visibility can help you better manage both expenses and risk.
How Can an End-to-End View of Transactions Help?
End-to-end visibility is the goal. It gives you more accurate insights into real-time gross working capital. It helps you understand how your value and cash flow are moving and changing and offers the ability to actually witness the impact of geopolitical and market forces in real time. In turn, gross working capital impacts everything.
Visibility gives the company the ability to leverage supply and demand disruptions for market share gain and to avoid excess inventory issues. It also makes it easier to analyze key risks and bottlenecks that get in the way of business growth, so you can plan an operating strategy that actually results in a healthier bottom line and sustainable expansion.
In addition, better visibility helps you tell the difference between initiatives that result in cost savings and those that are wastes of energy. After all, your job is not to depend on a cost reduction approach forever but to use cost savings to grow the business sustainably.
Accurate demand sensing can provide this visibility so that you can fit supply orders to executable time windows. Sensing supply changes earlier allows the team to appropriately buffer to meet expected demand without going overboard and packing an already vulnerable supply chain with excess inventory and hard-to-shift stockpiles. That way, the team can refocus product line portfolios to generate enough margin alongside existing capabilities and market environments.
Technologies such as demand sensing give you and your team a new level of control over operations, which can feel quite out of hand these days due to unpredictable global forces and disruptions. Gain back control with digital supply chain visibility and stay connected to the real-time fluctuations of supply, demand and cash flow.
