Keeping control of your cash flow is one of the best ways to stay afloat. The crushing cashflow issues companies faced since markets started shutting down in March continue even today. Image Credit: Getty Images

Two critical lessons business leaders across the region learned during the lockdown will likely take centrestage in the business continuity assessment and future planning discussions executives are having as economies continue to open.

One is that cash truly is king. The crushing cashflow issues companies faced since markets started shutting down in March continue even today. Buyer payment cycles that were 30-60 days stretched to 90 days and, now, are running as long as 180 days - assuming suppliers will get paid at all. This was the number one challenge we heard from business partners, and continues to threaten business continuity during the recovery period, not only across the region but around the world.

Second is that today paper invoices are worth about as much as the paper they are printed on. Companies still relying on paper invoicing and supply chain management systems spent lockdown periods literally shut out of the ability to churn out invoices and follow up on payments.

They physically could not access the files necessary to follow up with customers to secure payments. Surprisingly, 50 per cent of businesses around the world still rely on outdated paper-based systems.

An imperative

These two learnings contribute to the realisation that digital supply chain management and payment infrastructure is no longer an investment in the future. Those days are long gone. It is an imperative for building a sustainable operation that has a fit-for-purpose business continuity plan.

Despite a corporate landscape marked by innovative and forward-looking companies, businesses in this region have been notoriously slow to invest in and adopt core digital infrastructure strategies and technologies, primarily based on fears over cost and time. Some consider digital infrastructure a “nice-to-have” and in line for future investment, but has not made it to the top of the list.

Others are concerned with the time it would take and the potential disruption it would bring to the business.

The cloud beckons

Both are misconceived and outdated ideas that add unnecessary risk and financial burden to companies. With the advancement in cloud-based, fully digitised supply chain invoicing and payment systems, we’ve seen international companies connect more than 5,000 buyers in just four weeks into a single online management system with one common interface, eliminating the need to navigate thousands of disparate buyer portals.

Businesses today can digitize with maximum speed and efficiency. They can eliminate unnecessary man hours and costs required to maintain an inefficient paper-based system requiring follow ups daily to track payments from buyers. Most important, they can get money flowing again.

And getting money flowing again is the number one priority for everyone. The Danish Export Credit Agency (EKF) recognised just how much getting payments moving through the supply chain mattered to their national economic recovery. Through a partnership developed by Tradeshift, EKF is implementing a tech-driven supply chain financing model to support exporters in the country having difficulty collecting from international buyers who are delaying payments to preserve their own working capital.

All in

This new framework integrates EKF, strategic banking partners and the largest companies in the nation on a single online technology platform. By targeting 250 of Denmark’s largest companies, this system is expected to unlock $55 billion in supply chain payments over the next 12 months to directly support economic recovery from COVID-19 and get money flowing through businesses.

The reality is there is no post COVID-19 path to normalisation, even if you throw in the overused “new normal” terminology. The UAE leadership was quick to recognize that seismic economic and geopolitical changes will frame our future. They formed their own national think-tank approach to plotting how to be ahead of the curve in the post COVID-19 world. For the UAE, it is not about the path to recovery. It is always about chartering the course for the next 50.

A recovery is not enough

Business leaders across the region must start with the path to recovery. But they also need to look beyond just recovery, which means re-thinking the foundation and infrastructure their core operations are built on.

Both the immediate recovery phase and long-term future growth strategy share a common foundation: digital transformation and sustainability. That is the defining business issue of our age to maintain competitiveness and drive continued future growth.

Now is the time for businesses across the region to commit to closing their digital gaps. The smart starting point today is digitising core infrastructure, supply chain management and invoicing and payment systems.

These are essential to help get cash flowing again in the short-term, protect business continuity in the face of an uncertain future, and build a strong, core foundation for a prosperous, sustainable future.

- Dan Quinn is General Manager of Tradeshift Middle East & Africa.