Key performance indicators such as days sales outstanding or days in receivables can be used by companies to benchmark themselves with their peers.
Benchmarks of business performance indicate that enterprise resource planning (ERP) systems and other enterprise technologies have transformed customer and supply chain processes but that the performance of the finance function has hardly changed. Although some companies have managed to improve the performance of their financial processes profoundly, financial functions are still neglected in many businesses, and days sales outstanding (DSO) and working capital needs are very high in several industries. The working capital scorecard for 2011 from CFO Magazine demonstrates that there are significant differences between high and low performers within an industry. In the pharmaceuticals industry, for example, the best score in DSO was 4448, while the worst score was 117—two times more than the sector median of 57. Research from the Hackett Group indicates that finance department costs continue to consume more than 1% of revenues in many companies, and CFOs struggle with poor transparency of their daily cash flows.
In times when unprecedented economic uncertainty and soaring stockholder expectations are putting every function under closer scrutiny than ever before, the finance function should be driving business, not holding it back. Financial supply chain management (FSCM) can help companies to remove some of the inefficiencies in operational processes in order to become more effective.
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