As companies reposition themselves for growth in a transforming world, corporate treasurers have a unique role. While benchmarking remains an important tool for evaluating financial performance, it’s no longer sufficient to simply measure against your immediate competitors. Instead, finance teams must work closely with the C-suite to understand the company’s plans for tomorrow and anticipate which future peers to benchmark against. When your working capital measures up, your company may be ready to take the next step.
1. TRANSFORMING TREASURY
Companies across a wide spectrum of ages and sizes are embracing tech and exploring new business lines. For treasurers, the implications are significant, since financial efficiency can be a key indicator of a company’s ability to execute a new strategy. Benchmarking is still an effective way to measure efficiency, but it’s essential to pick the right peers—even if they are a different size, or in different businesses than the company is today.
2. GATHERING THE DATA
Differences in resources, strategy or culture may hinder your ability to identically implement a competitor’s benchmark. Closing performance gaps—rather than replicating results—should be the overall goal. The following considerations can guide the way:
- Specify which issue or challenge your organization is facing
- Decide which metrics you will use
- Identify which internal calculations you will need to supplement the benchmarking data
3. FORMULATING THE PLAN
After collecting all external and internal data, it’s time to evaluate it and decide how to act. There are typically two steps to this stage:
- Pinpoint how the data can help you
- Designate staff responsible for carrying out the plan
4. MAKING THE CASE FOR CHANGE
Making the business case requires persuading stakeholders from across the company about the benefits of change. Frequently, the team can accomplish this by quantifying the potential impact of the changes it is proposing. Communicating the amount of working capital that might be generated by reducing Days Sales Outstanding (DSO) or extending Days Payable Outstanding (DPO) can be an effective way to rally an entire organization.