Tuesday, September 30, 2008

The Credit Crisis and Cash Management

By Mark Brousseau

As a result of the unfolding credit crisis, the use of purchasing cards and travel and entertainment (T&E) cards may soar as companies look to take advantage of float, buyer discounts and reductions in accounts payable staff available for posting and payments. That’s according to Ed Bachelder (ebachelder@hitachiconsulting.com) of Boston-based Hitachi Consulting (formerly Dove Consulting, a division of Hitachi Consulting).

“The goal will be for companies to conserve their cash and help treasury management minimize their need for credit,” Bachelder told me. “The cost of capital for many businesses will double if the Washington D.C. bailout does not work.”

Bachelder also believes that inflation could also be on the rise again if the bailout does not work and the dollar weakens. “This looks a lot like 1978-82, with the specter of stagflation, and double-digit inflation and interest rates,” Bachelder said. “That was the era when complex treasury and cash management functions rose to prominence in most companies.”

Many companies will also look for ways to reduce costs as a result of the credit crisis, Bachelder said. For instance, some companies will leverage self-service and automated technologies. “Look for more promotion of Internet bill payment, and less ‘live representative’ interaction,” he said. “Billers will jump on the pay-it-green bandwagon and get serious about online bill presentment, seeking payment via ACH debits (pull) and credits (push).”

Bachelder also believes that outsourcing will continue to grow as companies pare back to their core competencies. “More firms may decide that running an in-house lockbox may not be part of the picture,” he explained. What do you think? Post your comments below.

No comments: