Cash is not just king; it’s a critical part of long-term business resilience and continuity. It also brings challenges that strike at the heart of every employee and customer experience, supplier partnership, and financial outcome. With SAP S/4HANA, companies can navigate it all by optimizing their balance sheet.

According to McKinsey partners Kevin Laczkowski and Mihir Mysore, combining core competence with financial levers such as balance sheet optimization is the key to building resilience in preparation for the recession or recovery.

Gaining this competitive edge requires intelligent insights that come from technology framework with integrity. By deeply integrating systems and common data, businesses can leverage the speed and agility of in-memory tools to unlock hidden patterns and perspectives. This capability allows businesses to shore up operations, retain customer intimacy, develop dynamic supply chain agility, and manage resources in a more synchronized manner.

Finding Resilience in Real-Time ERP Data and Intelligent Connectedness

While legacy systems may still automate different parts of business operations, they still cannot provide real-time insights needed to overcome excess inventory or offer in-the-moment customer service. All too often, decisions are based on historical transactional models that are less than customer-centric and too rigid to entertain out-of-the-box thinking to adapt and orchestrate across the enterprise.

As soon as the company moves to intelligent enterprise resource planning (ERP), a platform for recovery, growth, and resilience comes to life. Realizing this power is tremendously welcome in this age of uncertainty. But first, executives must select and implement an ERP solution that delivers quantifiable benefits enterprise-wide – from customer service, sales, and inventory to the management of working capital and the cost of material, labor, and overhead.

Consider SAP S/4HANA. The size of its impact is less about company size and industry and more related to instituting a comprehensive and unified IT system that all employees can adopt and understand intuitively. It ties external and third-party processes directly with internal processes and data structures – consistently and flexibly enough to make intelligent insights quickly accessible, visible, and actionable. 

With greater visibility, deep forecasting tools, and real-time insights across internal and external partners, businesses can drastically decrease, for instance, their inventory costs and improve their inventory turnover rate by more than 20 percent. But this is not a one-time reduction; it is ongoing and extended to lower overhead spend in transport, warehousing, handling, obsolescence, insurance, taxes, damage, and shrinkage. Even in times of lower interest rates, companies can cut their carrying costs.

Other benefits of using SAP S/4HANA to optimize the balance sheet include:

1. High-performance operations
Capabilities of intelligent ERP solutions enable businesses to manufacture and purchase the products or services they need and deliver them when and where required. And it is achieved with the agility to adjust operational plans and practices to meet customer expectations.

The predictive capabilities of SAP S/4HANA can help evolve material requirements planning quickly with real-time data. They take the guesswork out of managing internal business operations and minimizing work-in-process and finished-product inventories optimally and accurately.

2. Enhanced supplier network collaboration
Improved procurement practices often lead to better vendor negotiations, resulting in cost reductions and 30 percent higher efficiency of input raw material purchases. Tight vendor integration and collaboration elevate the business’s ability to schedule changes, negotiate, and deepen quality assurance with greater ease and impact on the customer’s last-mile experience.

SAP S/4HANA can assist in the identification and elimination of bottlenecks in supply chain processes and respond to demand changes. Operational managers use this insight to adjust product quantities and delivery times, allowing their vendors to meet their obligations better with visibility into consumer requirements and pass any resulting savings to the sale price.

3. Labor optimization
With higher predictability and orchestration, fewer shortages and interruptions arise. These outcomes allow more predictable management of resources; better quality and training; less time spent on rush orders, expedited rework, and employee overtime; and fewer stress-induced expectation mismatches.

With SAP S/4HANA, businesses gain greater visibility into changing priorities. They can automate their communications with customers and vendors and accurately promise delivery dates, which are critical for building customer loyalty.

4. Well-governed finance operations
With greater automation in the delivery and receipt experience and well-negotiated customer and vendor contracts, organizations can optimize their financial strength in ways that increase working capital.

SAP S/4HANA sets a foundation to automate collection and cash management with machine learning and artificial intelligence (AI). In return, the number of days of outstanding receivables can decrease and billing times can shrink by more than 50 percent, while limiting fraud and providing additional available cash. Plus, automated three-way matching accelerates supplier discounting, cash planning, and financial forecasting to optimize capital on hand.

5. Consistent and profitable customer service and sales
By understanding customers with the assistance of experiential and operational data, companies can run business models that are targeted and differentiated. For example, pricing models that match customer needs creatively may support vendor-managed inventory, usage-based billing, unique product configurations, and other longer-term integration strategies.

By tightly tying customer needs to sales and production, SAP S/4HANA empowers businesses to offer more predictable and differentiated customer service that increases sales revenue and brand loyalty. Improvements in customer relationship management result in on-time delivery as promised. Returns and rework are also avoided, no matter how unique the product.

Emerging Stronger With an Optimized Balance Sheet

Economically speaking, CFOs are reaching a point where their priorities go beyond finance. In addition to managing cash flow, days sales outstanding, receivables, and payables to optimize cash flow, they guide organizational efforts to improve business processes and intelligence company-wide. More importantly, their balance sheets and income statements reveal new strategies for overcoming today’s uncertain landscape.

This approach to finance leadership puts businesses in a better position to differentiate themselves and boost market penetration organically, while reducing accounts receivables and inventory, optimizing inventory material and labor, and growing sales volume. And the more resilient companies become with SAP S/4HANA, the better their financial position – stock prices rise, profits increase, and revenue is more predictable.

Discover how SAP S/4HANA can help build a balance sheet that strengthens a company’s resilience to navigate turbulent times and plan for whatever comes next. Read “What Companies Should Do to Prepare for a Recession” from the Harvard Business Review, and explore today’s intelligent ERP, SAP S/4HANA.