The Fathers House

That Father’s House implemented VersaPay ARC®, a cloud-based solution that automates the entire invoice-to-cash process: presentmentcollaborationcollectionspayments and cash application. With ARC, The Father’s House replaced two legacy systems, enabled an exceptional customer experience throughout the invoice and payment process and saved its AR Specialist real time.

With ARC’s seamless Sage Intacct integration, invoice presentment has been fully automated.
A full day’s work each month has been reduced to no more than an hour or two. No more manual entry. With ARC’s invoice delivery tracking, The Father’s House now has the ability to see not only that invoices were successfully delivered, but when they were viewed and opened.

ARC’s easy to access payment portal allows end-customers to enter the portal with 1-click.
Customers can pay the way they want with increased payment options – including ACH – and have the ability to set-up AutoPay. With automated notifications and in-platform messaging, customers are always aware of when payments are due. With real-time dashboards and customer tagging, the AR Specialist has complete visibility over customers and payments.

With VersaPay ARC, The Father’s House has enabled its AR Specialist to better serve its customers while getting paid on time.

Voice of Our Customers: What Smart Leaders Say About Customer Experience



We asked finance and IT leaders across industries to explain why providing an excellent customer experience is so critical in today’s business landscape.

With VersaPay ARC, delivering a memorable, self-service customer experience is simple. Put your customer at the centre of your AR process and make it easy for them to do business with you.

COVID-19 Response – MDM Live Event: Cash Flow Management

In this 20mins video, John Gunderson, VP of Analytics and e-Business at Modern Distribution Management (MDM), explains what distributors and manufacturers can do today to manage cash flow in the face of the COVID-19 pandemic.

John recommends 5 levers that you as a distributor could pull to strengthen your position:

  1. Cash discounts
  2. Special terms for specific customers
  3. Rebates
  4. Stock programs
  5. Manage your back orders aggressively
  6. BONUS TIP: Automate your AR and AP

Interested in learning more? MDM are hosting weekly live events with leaders across the wholesale distribution sector. Register for the next event here.

5 Ways Your Finance Team Can Stay on Top of its Receivables Today

The End of Economic Prosperity

As reported by the International Monetary Fund, the United States is now in the worst economic downturn since the Great Depression. Unemployment, retail sales, economic output and industrial production are all at record numbers. In this time, it is critical for organizations to recognize the severity of the current situation, and to realize it is not just business as usual. Every business must change how they operate now, in order to survive the current economic downturn.

Staying on Top of Your Receivables

Change can be difficult, and oftentimes organizations struggle knowing where to start. But a good first step any business can take to ensure business continuity is staying on top of receivables. To do this as effectively and as efficiently as possible, here are five tips we’ve gathered from clients as they share what they are doing today to adapt to the everchanging environment.

01. Avoid Clamping Down too Harshly on Your AR
When faced with a crisis, a common first reaction from finance leaders is to lock things down, and to try and collect on all outstanding invoices. But being too aggressive with your customers could drive them away and lose business for your company in the future. The key is consistency; be considerate of the current situation, but also be realistic about your finances too. Communicate to your customers what your expectations are going forward and make clear of any consequences should they not hold up their end of the bargain. Maintain an open line of communication and treat every deal as a partnership.

02. Employ the Carrot and Stick Approach
Successful AR managers are able to find the right balance between the carrot and stick approach and utilize both methods simultaneously to effectively stay on top of their receivables. Our clients recommend pairing positive reinforcements like discounts with negative reinforcements, such as late fees. Here, the goal isn’t to punish your customers, but instead to encourage them to pay in a timely fashion. As was the case with tip #1, your organization must be consistent in its approach. If you’re offering discounts to customers who pay within 10 days, that means 10 days. Ensure both sides have a clear understanding of your expectations, and if in doubt, over communicate until you’re satisfied.

03. Be Flexible
The global environment we find ourselves in today is unlike anything we’ve experienced before, there is no handbook for what we’re current dealing with. We’re all trying to figure things out as they happen. To that end, our clients recommend retaining some level of flexibility in your business processes, so you are better able to support those who are struggling to get by. So long as you are in the cash position to do so, delivering a flexible customer experience in these times can help strengthen your relationships in the long run.

04. Use Technology to Your Advantage
In order for your organization to effectively facilitate the first three tips, you must first ensure you have the right technology in place to do so. A good place to start is with an AR Automation solution that seamlessly integrates with your ERP and streamlines your collections process. The right solution will:

  • Save you time by automatically completing many labor-intensive tasks
  • Save you money by moving your current paper processes to a digital environment
  • Reduce the likelihood of human error and costly mistakes
  • Provide better insight into your current cash flow state

05. Have the Right Capabilities
When choosing your AR solution, look for a platform that provides the following functionality:

  • Customer Information: Your solution should maintain a record of all customer information. Treat it as a CRM for AR!
  • Automated Collections: Your solution should automatically handle all task-based activities, so your team only needs to worry about exception-cases.
  • Customer Scorecards: Your solution should give insight into customer payment behaviour, so you can confidently determine which customers you can be flexible with.
  • Ability for Customers to Communicate with You: An effective AR solution will allow for two-way conversation between you and your customers, so you know they’re always in the loop.
  • The Ability for Customers to Pay You: Your AR solution should allow for several payment methods to make it as easy as possible for your customers to pay you.
  • Integration into Your ERP: Your solution needs to integrate seamlessly with your ERP system.
  • Customer Reporting: No matter how complex your organizational structure may be, your AR solution should be able to distill things down so you can track AR at all levels.

Incorporating such a solution into your current business process today will enable your organization to stay on top of its receivables and provide business continuity during these uncertain times.

If you’d like to learn more about how your business can transform today, please contact us directly and we’ll be happy to answer any questions you have.

For helpful resources on working from home in the age of COVID-19, check out our new Resources page!

The Risks of Not Accepting Electronic Payments

The present economic environment is leading organizations around the world to make stark realizations about their current business processes. Of particular concern, business leaders are learning how unsustainable traditional payment methods like checks and lockboxes can be, and they are looking for new ways to enhance or replace their existing systems to bring continuity to their business. Enter digital payments.

Why Digital Payments Now?

Several macro-economic trends indicate that organizations now, more than ever, should be utilizing electronic payments. The following are three primary trends we’ve seen which signal it’s time for organizations to adopt a digital payments solution:

  1. Changing Customer Expectations
    Customer expectations are ever-changing and organizations that don’t keep up are at risk. Customer self-serve, online shopping, mobile banking, and on-demand services have led consumers to expect instant gratification for their behavior. Those expectations as consumers have translated over to our lives at work and are having real effects on relationships with suppliers and business partners. The move towards an online, self-service environment indicates that organizations should explore such solutions for their business processes.
  2. Changes in the Workforce
    Millennials are now the largest generational cohort employed in the workforce. Their experiences and how they operate in the workplace matter. Process heavy roles are no longer desirable and attracting and retaining top talent will be near impossible for organizations that don’t change. Effectively catering to the needs of millennials is important to driving future success for businesses. Considering this, steering your processes away from being manual and paper-based to a more automated and digital environment is a no brainer!
  3. Remote Work and the “New Normal”
    If you’re still unsure about digital payments, consider that the present environment we find ourselves in makes a traditional payment collections process (sending and receiving checks) a safety risk. With companies having implemented ‘Work from Home’ measures that will be in place for the foreseeable future, transitioning to a payment process that keeps your company agile has never been as important as it is right now.

Risks of Not Offering Digital Payments

Choosing not to offer digital payments to your customers presents two main risks that can impact the success and longevity of your business.

  1. Customer Power and Loss of Revenue
    Customers have tremendous substitute and negotiating power. We’ve all bought something from Amazon because it was the most convenient option, knowing we could have gotten it cheaper elsewhere. If your business processes make it difficult for your customers to do business with you, they will take their business to someone who can offer a more convenient experience, ultimately affecting your stream of revenue.
  2. Operational Challenges
    Forgoing a digital payments process leaves your business and your suppliers dealing with the added effort that comes with a manual payments experience. A cumbersome, manual payments process requires many steps and human effort to deliver a quality customer experience, every time. Not to mention, with the paper and labor resources required, it can be costly to your business. In a price sensitive market where margins are tight and you’re trying to grow and scale your business, manual processes of any kind are simply not sustainable. Compounded together, this introduces lags to your processes and slows down the speed at which you get paid, eventually driving up DSO, reducing working capital, and limiting the agility of your operation.

As John Shamanis, CFO of Carrier Enterprise put it, “If we’re not simplifying our transactions — and the transaction experience for our customers — then we’re failing.” By enabling your customers to pay you the way they want to, you are improving the experience you deliver to them while saving your team time and money. It really is a no brainer!

If you’d like to learn more about how your business can improve its payments experience, please contact us directly and we’ll be happy to answer any questions you have.

For helpful resources on working from home in the age of COVID-19, check out our new Resources page!

Streamline Your Collections with AR Automation

The current global environment has turned ordinary business on its head, forcing companies to come up with creative solutions to adapt to the rapidly evolving and uncertain economic climate. For those businesses that rely on a manual collections process, this puts a wrench in an already tedious and time-consuming undertaking.

With remote work expected to remain the new normal for the foreseeable future, it will be especially trying for these organizations to maintain business continuity within their current processes. Luckily, solutions like AR automation can help to eliminate the mundane tasks that tie up your finance team, enabling a more streamlined collections experience that ensures continuity for your business.

The Current State of Collections

Consider a day in the life of a Credit and Collections Manager today. They are required to check several accounting systems and their ERP for updates on customers’ standing. Credit managers will oftentimes need to manually input or manipulate this data into different reports for internal purposes, before cross-referencing it with their ERP and accounting systems, perform follow-ups with clients, all while tracking these interactions in a separate CRM tool.

Considering all of this effort, there are three main challenges that a manual collections process brings with it:

  1. Manual Work
    Simply put, a manual collections process is far too labor intensive; there are too many systems involved, which ultimately means time that could have been put towards other value-added work is wasted managing those separate systems.
  2. Out of Date Data
    Once your credit and collections team pulls data from your accounting systems, it immediately becomes out of date. Most standard accounting systems are not equipped to provide a live feed of data, so any payments made throughout the day will not be reflected until the next time that data is pulled.
  3. No Prioritization
    Manual collections makes prioritizing collections efforts – beyond total amount owing or recency – near impossible. As a result, the team is unable to focus their time where it would make the biggest impact to the business.

How Automation Can Streamline Collections

There is a better approach to this process and it all begins with automation.

  • Zero-Touch Collections
    Leveraging AR automation will enable your business to generate automated reminders for your customers that are based on your desired level of interaction with them. You will be able to easily target customers before they become overdue, and eliminate time spent chasing them down.
  • Real-Time Communications and Dispute Management
    AR automation gives your customers an easy-to-use portal for communicating with your collections team, allowing them to better manage disputes or answer questions as they arise.
  • Internal Follow-Up/Notifications
    With automation, your collections team will receive timely notifications and reminders that will empower your team to work smarter, not harder.
  • Audit Trail
    Having a clean audit trail that lists all interactions with customers in a centralized view is key for finance teams. Automated collections delivers an up-to-date view of your interactions with your customers.
  • Actionable Insights
    By leveraging automation, your finance team will gain clear insight into where to direct their immediate attention and intervention, while the software handles the rest.
  • CRM for Accountants
    Automated collections tools give finance teams a CRM (Customer Relationship Management) platform for accounts receivable. All team members will have a universal method for tracking their interactions with customers and record notes for anything that may require attention.

Task-based vs. Exceptions-based Collections

An important benefit of automating collections is the ability to move from task-based collections to exceptions-based collections. Task-based collections management is the traditional collections approach in which credit and collections teams spend their days working through exhaustive ‘to-do’ lists, including: manually investigate historical data for debts and bills, send emails to customers when they are XX days past due, process payments and refunds, update account status records, resolve billing issues, and so on. With exceptions-based collections management, automation does the bulk of the work so that you and your team only need to step in when human interaction is absolutely required to get the job done.

If you’d like to learn more about how your business can streamline its collections with AR automation, please contact us directly and we’ll be happy to answer any questions you have.

Transitioning Your Invoicing From Paper to Electronic

Remote working brings about many challenges for organizations and the AR department is no exception. For businesses that rely heavily on manual and paper-based processes, the current situation will be especially tough. With economic uncertainty the only certainty at the moment, it’s important for finance leaders to make the necessary changes now, in order to position their company for survival in the months ahead, and an eventual return to growth. One change that can help is to make the move to electronic billing.

You’re not at your office to print and stuff envelopes. Your customers aren’t at their offices to receive invoices in the mail. Making your invoicing process fully digital enables you to deliver invoices from your at-home office and ensures your customers can receive those invoices from wherever they are working. Beyond the usual arguments for going digital – time savings, eliminate mistakes caused by manual entry, and save envelope, printing and postage costs – digital invoicing can help ensure business continuity in today’s rapidly changing market.

How to Make the Switch?

Once you’ve recognized the need to switch from paper to digital, you need to put together a strategic plan. When putting together your plan, there are 4 key elements to consider:

  • Customer Email Addresses
    Ensure your business has a record of customer email addresses or has a plan on how to collect them. Having your customers email addresses is essential to electronic invoicing, as this is how invoices will be delivered.
  • Goals and Objectives
    Clearly outline your goals for switching to a digital process. Mainly, why are you making the switch, what is the win you’re aiming to get out of it, and in what timeline?
  • Customer Communication and Change Management
    Communicate with your customers in advance. Make them aware of the changes coming, the benefits they will reap from this new process, and of any adjustments they may need to make.
  • Implementation Approach
    Decide if you are going to phase-in the new process, or launch it simultaneously for all customers? Both approaches have pros and cons, but it will ultimately be up to the decision makers on your team to make that call. If you would like to learn more about the pros and cons of these implementation approaches, please feel free to reach out to us directly.

Once you’ve established a strategic plan of action, it’s now time to execute. Execution is important for businesses to get right, especially when trying to migrate customers who are also facing new and changing challenges. There are, however, ways for you to make this transition smoother.

  • Incentivize Customers
    Incentives are a great way to get your customers to adopt your new invoicing format – whether you hold a draw or offer some form of discount – it will go a long way to making the transition less stressful.
  • Update Onboarding Materials
    Address and explain electronic invoice presentment in all new customer onboarding documentation and advise that manual invoices will not be distributed.
  • Don’t Make Customers Set-up Logins and Passwords
    Simplify enrolment for your customers. We’ve found the number one barrier to e-adoption is the need to create some form of identification and passwords. Highlighting to your customers that this is not required will be a huge bonus, and you can expect to see a much higher adoption rate from them as a result.

Electronic Billing is the First Step

Implementing a fully digital invoicing process is a great step in establishing business continuity in today’s climate – but it’s only one aspect of accounts receivable. Enabling customers to easily pay, communicate, and collaborate online are all important aspects of managing cash flow and delivering customers a consistent experience.

If you would like further advice on how to implement a digital invoicing solution or about anything else we’ve discussed in this blog, please reach out to us directly and we’ll be happy to answer any questions.

Advice to Distributors For Managing Industry Disruptions

Examining all 19 wholesale distribution sectors, recent research from MDM paints a picture of a selling environment where consumer and government spending are keeping the economy healthy, but where manufacturing continues to soften. Annual revenue changes for the industry overall represented 1% growth in 2019 versus 2018. “We’re expecting a rebound in activity in 2020,” Indian River Consulting Group’s J. Michael Marks said in a recent MDM webcast.

Despite his bullish outlook, Marks cautions distributors to look more closely at industry disruption versus economic conditions, and to factor the former into any good cash flow management approach. These steps go beyond shoring up balance sheets, taking out lines of credit, and doing a better job of A/R collections. They range from getting sales involved in the process to collaborating with key suppliers to developing “moats” that help your distributorship stand out from the pack.

Create Moats

Defined as “hard-to-digitize services,” these moats have helped companies like Anixter maintain competitive advantage in both good and challenging selling environments. “Anixter created a moat and was very public about it; they’ve been doing it for years,” says Marks. “Ultimately, it’s about being able to separate out a percentage of revenue every month that doesn’t sell well using a part number on a website.”

Have Frank Discussions

On the supplier collaboration front, Marks encourages distributors and manufacturers to have frank discussions with one another versus just sending invoices and payments back and forth. “Look at who’s doing what in the channel, and figure out ways to reduce redundancies,” he advises. “That advice stands in any economic conditions.”

Build a Great Customer Experience

Marks tells any distributor that wants to preserve through a recessionary period and/or an industry disruption to focus on building a great customer experience. “Most managers and owners don’t know their customers; they just get information from their salespeople,” he says. “Gather the data and insights that lead to a better understanding of your customers, and then allocate resources appropriately.”

Be Aggressive

Finally, Marks points out that companies only gain market share on the shoulders of an economic cycle, and not when everyone else is going strong and growing quickly. “No one had cash to grow at the bottom,” he notes. To best position themselves for success during and after a possible downturn, Marks says not waiting until it’s too late to get aggressive with receivables collections and inventory reductions will go a long way in helping to preserve valuable cash.

“Pay attention to your cash-to-cash cycles, knowing that most distributors tend to get complacent with 10 days of cash to withdraw,” says Marks, “and don’t be afraid to dramatically reduce inventory, knowing that manufacturers will sell at lower prices when they’re stuck holding finished goods inventory and everyone’s cancelling orders.”

In a new white paper launched by Modern Distribution Management (MDM), we explore the current business environment, show how it could evolve over the next year or two and provide actionable advice that all companies can use to preserve cash flow in any economic condition.

Click here to download “How You Can Preserve Cash Flow to Strengthen Business in a Slowing Economy” white paper.

Great Hill Partners and VersaPay Corporation Announce Closing of Acquisition

BOSTON and TORONTO, Feb. 21, 2020  – Great Hill Partners (“Great Hill”), a leading growth-oriented private equity firm, and VersaPay Corporation (TSXV: VPY) (“VersaPay” or the “Company”), a market leading provider of a SaaS accounts receivable, invoicing and integrated payments technology platform serving B2B customers, today announced the successful completion of the previously announced acquisition of VersaPay by an affiliate of Great Hill, pursuant to a statutory plan of arrangement under the Canada Business Corporations Act (the “Arrangement”). Under the Arrangement, each VersaPay shareholder will receive cash consideration of C$2.70 for each common share held, valuing VersaPay’s total equity at approximately C$126 million on a fully diluted basis. 

VersaPay is a leading provider of cloud-based invoice-to-cash solutions, enabling businesses to provide a superior customer experience, get paid faster, streamline financial operations, and dramatically reduce days outstanding and costs. Since the Company’s inception in 2006, the Company has grown its client base into a global network by expanding service offerings through strategic partnerships, acquisitions and the development of alternative payment processing solutions.

Through the VersaPay ARC platform, customers can view invoices online, collaborate on inquiries and disputes, and facilitate secure online payments (EFT/ACH and credit card). Customers also gain access to a suite of powerful tools that enable efficient collections, cash application and real-time insight into accounts receivable. The VersaPay ARC platform automatically reconciles payments and account information through integrations with a wide range of ERPs and accounting software providers.

“We are investing in VersaPay because they have built an innovative solution for customers transitioning to accounts receivable and B2B payments automation,” said Matt Vettel, Managing Partner at Great Hill. “Our partnership with VersaPay demonstrates our continued dedication to supporting the development of SaaS-enabled companies, and we will provide the VersaPay team with the resources needed to continue their global expansion.”

“As a privately owned company backed by a strong partner like Great Hill, VersaPay will be positioned to invest strategically and focus on long-term growth,” said Craig O’Neill, Chief Executive Officer of VersaPay, who will continue in this role. “Our mission remains unchanged, as does our commitment to our customers and our passion for driving innovation in the AR automation space. We are excited about this next stage of our journey and our partnership with Great Hill as we work together to become the clear leader in our markets.”

INFOR Financial Inc. served as exclusive financial advisor to VersaPay in connection with the Arrangement. Capital Canada Limited provided a fairness opinion to the independent committee of the board of directors of VersaPay. Cassels Brock & Blackwell LLP acted as Canadian counsel to VersaPay and Arnold & Porter Kaye Scholer LLP acted as U.S. counsel to VersaPay. Blake, Cassels & Graydon LLP acted as Canadian counsel to Great Hill, and Alston & Bird LLP acted as U.S. counsel to Great Hill.

About Great Hill Partners

Great Hill Partners is a Boston-based private equity firm targeting investments of $25 million to $500 million in high-growth companies across the consumer, digital infrastructure, financial technology, healthcare, and software sectors. Over the past two decades, Great Hill has raised nearly $8 billion of commitments and invested in more than 75 companies, establishing an extensive track record of building long-term partnerships with entrepreneurs and providing flexible resources to help middle-market companies scale. For more information, visit www.greathillpartners.com.

About VersaPay Corporation

VersaPay is a Fintech company and leading provider of cloud-based invoice-to-cash solutions, enabling businesses to provide a superior customer experience, get paid faster, streamline financial operations, and dramatically reduce DSO and costs. VersaPay ARC is the first platform to provide Customer-Centric AR™ with a customer self-service environment to view invoices online, collaborate on inquiries and disputes, and facilitate secure online payments (EFT/ACH and credit card). Businesses gain access to a suite of powerful tools that enable efficient collections, cash application and real-time insight into accounts receivable. VersaPay ARC automatically reconciles payments and account information through integrations with a wide range of ERPs and accounting software providers. For more information, visit https://www.versapay.com/ 

Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.

8 Ways for Distributors to Preserve Cash Flow in a Slowing Economy

What is Cash Flow?

The total amount of money received and doled out over a given period (usually a quarter), cash flow can either be positive or negative. Positive cash flow indicates that a company’s liquid assets are increasing, enabling it to settle debts, reinvest in its business, return money to shareholders, pay expenses and provide a buffer against future financial challenges.

Companies with strong financial flexibility can take advantage of profitable investments. They also fare better in downturns, by avoiding the costs of financial distress. Once the money going in and out of the business has been calculated, companies can come up with a “free cash flow” number or FCF. This is the money that the distributor has left over to expand the business or return to shareholders, after paying dividends, buying back stock, or paying off debt.

Wholesale Distributors are in a Sticky Spot

Because they effectively bridge the gap between manufacturers who make products and the end user customers that need those goods, wholesale distributors can find themselves in a sticky spot on the cash flow spectrum. This can turn into a more serious problem when economic conditions begin to soften.

Here are eight steps distributors can take now to start preparing for a more challenging economy:

  1. Spend your pennies wisely. While it may be tempting to view everything as an “investment”, smart companies look at whether those expenses are absolutely necessary… or not. If that additional employee, warehouse expansion or new storeroom floor isn’t going to positively impact your bottom line over the next 6-12 months, you may want to put a pin in that idea until the economy stabilizes.
  2. Open a business line of credit. “Set up a line of credit while you’re flush with cash,” software provider Logiwa advises. “Banks won’t be as willing to help you out when your business is struggling, so it’s best to arrange a line of credit in advance.” It’s important to note that this doesn’t displace the need to maintain a positive cash flow, but it is an additional way to make ends meet when sales pipelines start to slow.
  3. Use an inventory management system. By their very nature, distributors have a lot of resources tied up in inventory. Some track inventory by hand, others use spreadsheets and others do it through their enterprise resource planning systems. Another good option is a robust inventory management system that can be used to track inventory in real-time, set reorder points, manage barcode or RFID scanning and/or integrate with existing distribution systems (i.e., a warehouse management system). “Connecting your IMS to other ERP systems streamlines workflows, maintains the accuracy of your data and leads to efficiencies that generate cost savings,” Logiwa points out.

“When growth slows, looking at internal investments to improve your inventory position and cash flow can be the difference between making a plan or missing it.”

  1. Stay on top of your receivables. Run a report and determine which customers are paying on time or in arrears. Call any that fall into the second category — and particularly those that have already or are close to extending past the agreed-upon terms — and start collecting. “Offer incentives for companies that pay their invoices early and follow through with charging the interest or late fees outlined in your original contract,” Logiwa advises. “This will discourage customers from paying you late.”
  2. Use technology to get your money faster. By delivering invoices electronically rather than via mail, you can speed up billing and collection. By implementing a vendor portal, you can give vendors electronic access to invoices, enable electronic payments and reduce the time it takes to resolve disputes. “These solutions also tend to provide organizations with timely and robust reporting that can help you take proactive steps to resolve delinquent accounts or take advantage of supplier discounts,” Deloitte advises.
  3. Understand your expenses. In MDM’s Operating in a Downturn: Avoiding the Mistakes of the Past, distribution expert Albert D. Bates gives distributors pointers on how to prepare for a potential “slower growth” period. As part of that process, he tells companies to look carefully at their fixed and variable expenses and ensure that they fall within these ranges:
    Fixed expenses are “overhead expenses.” The key factor is that once a budget is set for
    the year, these expenses will only change if management takes specific actions to change them, such as negotiating a lower rent. For most firms, fixed expenses represent somewhere around 80% of total expenses.
    Variable expenses, in contrast, rise and fall automatically as sales rise and fall. They
    include sales commissions, interest on accounts receivable and the like. For the typical firm variable expenses are estimated to be 5% of sales.
  4. Don’t hoard your cash. A common reaction to declining sales, hoarding cash is a no-win proposition during a downturn. “Inevitably, this leads to converting inventory and accounts receivable into cash,” Bates says. In fact, lowering inventory almost always involves a “stop buying” edict that causes the firm’s service level to deteriorate. “Accounts receivable reductions have a similar impact on sales,” Bates cautions. “Lowering either of these will simply drive sales down at a faster rate.”
  5. Use good forecasting practices. An important aspect of cash management and profitability, forecasting involves looking at both income and cash flow statements and linking your cash flow forecasts to key working capital metrics from the balance sheet, such as DIO (days inventory on-hand), DSO (days sales outstanding), and DPO (days payables outstanding). Deloitte tells firms to also include capital expenditures, debt repayments and other operating cash flows into the equation. “To enhance the accuracy of these forecasts, consider automating this process rather than relying on error-prone and labor-intensive spreadsheets,” the firm advises. “Also, be sure to integrate cash flow forecasting with your profit & loss (P&L) statement and balance sheet so you can track performance against a range of indicators.”

In a new white paper launched by Modern Distribution Management (MDM), we explore the current business environment, show how it could evolve over the next year or two and provide actionable advice that all companies can use to preserve cash flow in any economic condition.

Click here to download “How You Can Preserve Cash Flow to Strengthen Business in a Slowing Economy” white paper.