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CFO Australia Magazine: New Approaches to Working Capital Supporting CFOs Through COVID-19

The following excerpt is from an article that appeared in CFO Australia Magazine’s Fall 2020 edition. To read the full article, click here

Working capital has never been more important and CFOs around the world are laser-focused on this important aspect of their role. One business, global engineering professional services company GHD, has completely transformed the way it manages working capital during the pandemic, a strategy that is delivering huge dividends.

Over 180 CFOs and finance leaders were treated to an insightful “CFO Lunchtime Live”  panel discussion during which GHD CFO Phillip Bradley divulged exactly how he had managed to transform working capital across the business. He was joined by James Solomons, CFO of online reference checking firm Xref, who facilitated the discussion, as well as Iain Rolfe, country managing director of cash flow management platform C2FO, and renowned economist Stephen Koukoulas.

At the start of the session, Koukoulas deftly outlined some of the variables CFOs are juggling when managing working capital.

“Public policy is putting a floor under the extent of this downturn. Easy monetary policy and interest rates at all-time lows translate to very low rates on overdraft facilities and debt. This means better cash flow if businesses don’t have to spend as much servicing debt.”

Government stimulus packages such as JobKeeper have also helped businesses to maintain their workforce, which has been really important for cash flow and the labour market.

While these accommodations are helping working capital management, there are plenty of stressors in the operating environment CFOs must still manage. For instance, late payments have exploded in sectors that are starved of cash. Nevertheless, Koukoulas says this won’t necessarily emerge as a major problem, as long as economic growth starts to trend up late this year and into next year.

Commenting on how his clients have responded to the pandemic and cash management, C2FO’s Iain Rolfe says like GHD, many are using the platform to demonstrate their commitment to corporate social responsibility by ensuring their suppliers have access to cash.

“They are using C2FO to push liquidity into the supply chain. Some are looking to invest their cash for a good return and injecting money into the supply chain is low-risk investment with a high return in an environment of persistently low interest rates,” Rolfe says.

Rolfe says there are other reasons businesses are using the C2FO platform. “They may have enough working capital but they need revenue growth. Whatever their reason, businesses that have implemented a technology solution like ours have been able to adapt to their circumstances much faster than other organisations.”

To read more coverage from CFO Australia, click here