Michael Cerda, Director and Finance Executive at SAP Ariba, described how to get internal and external partners on board for a digital transformation.
Cerda began his thought leadership presentation at the 2016 Chief Financial Officer Leadership Forum held on September 14 in Dallas with a state-of-the-markets update. “Rates are at all-time lows and corporate cash is at an all-time high. How do we redeploy that cash? How do we make investments and the proper returns based on the risk profile? I’m going to present a balanced model of what your company can drive for itself," he said, "but the reality is that because we’re in a digital economy, everything is so interconnected that it’s critical you not only make improvements for yourself but also for your counterparties—suppliers, vendors, and other people you deal with externally. If you’re going through a digital transformation, you need internal buy-in but also buy-in from your external partners,” said Cerda.
“Everything is so interconnected that it’s critical you not only make improvements for yourself but also for your counterparties—suppliers, vendors, and other people you deal with externally.”
“Usually, it requires a critical event to drive a digital transformation agenda. Historically, companies were stand-alone, contained within four walls, and all functions were fully controlled internally. Now we’re all interconnected and moving at such a fast rate of speed that we’re constantly trying to keep up. Our customers expect everything to happen digitally. We have all this data, but what are we doing with it? How we interact with our suppliers and deal with them drives how we interact with our customers. We’ve gone from everything happening within four walls to everything happening externally. The workforce, suppliers, customers, and the Internet of Things are all external but need to be tied to a digital core inside the company. This is the concept of reimagined finance.”
Cerda continued, “Anything related to a digital transformation initiative will involve having an open-architecture, comprehensive, and intelligent system in which not only different stakeholders in your company can participate but your external stakeholders can as well.”
Making the case for payables and working capital automation, Cerda said, “We need to ask how we quantify our relationships with our suppliers.” He outlined these financial values for buyers:
• Scalable and secure payment
• Invoice automation
• Earn early payment discounts
• Extend payment terms
The financial values for suppliers include:
• Payment visibility and remittance
• Invoice automation
• Faster collections
• Low-cost, on-demand financing
“A cloud platform is the best platform for interacting with our counterparties. This creates better collaboration and, potentially, a competitive advantage,” explained Cerda.
“A cloud platform is the best platform for interacting with our counterparties. This creates better collaboration and, potentially, a competitive advantage.”
Cerda provided the reasons why the following company executives would be excited by a digital transformation in finance:
• CEO/CFO—increased margins and earnings per share, extended DPO (income statement and balance sheet benefit), A/P transformed from a cost center to a profit center, and enhanced controls/risk mitigation
• Treasurer/Assistant Treasurer—greater cash flow, 12% to 36% risk free, risk mitigation, and bank account management
• CPO/VP Supply Chain/Director of Sourcing—providing suppliers early payment alternatives, economic value added, and payment visibility
• VP Shared Services/Director of Accounts Payable/Corporate Controller/Assistant Controller—touchless invoices, monetary discounts earned, and A/P inquiries
• CIO/Director of Finance in IT—one platform, “buy right pay right,” and lower TCO
Suppliers’ accounts receivables departments benefit from faster payment, access to on-demand financing, and easier reconciliation and financing. “All of this translates into enhanced free cash flow as well as risk mitigation and other benefits,” explained Cerda.
Cerda presented a three-step playbook for how to get started:
1. “Define and be specific about the initial ‘size of the prize’ to educate and excite colleagues. For example, you could say, ‘We made a decision to go from 200 different payment terms to four or five.’”
2. “Decide on governance—who’s the executive sponsor and who’s the day-to-day lead?”
3. “Distribute the agenda for the digital transformation at the initial cross-functional team meeting. It’s important to have all the teams at the table so they can see how they’ll benefit.”
“Define and be specific about the initial ‘size of the prize’ to educate and excite colleagues. For example, you could say, ‘We made a decision to go from 200 different payment terms to four or five.’”
ABOUT MICHAEL CERDA:
Michael Cerda is the Director of Finance, Executive—Cloud Network and Payables Strategy, at SAP. Michael has over 25 years of banking and finance experience in new business development, credit underwriting, risk management, and in working capital and payables strategy.
Michael has a diverse background in leading and managing teams working with corporate clients in the following industries: Diversified Corporate, Retail, Medical, Manufacturing, Technology, and Real Estate. He has extensive consultative client management knowledge, which translates to innovative treasury and strategic working capital solutions and in driving and accelerating digital transformation initiatives with corporate clients.
Michael previously worked as a Senior Vice President and Manager at Zions Bancorporation and as a Corporate Banker and Treasury Relationship Manager at JPMorgan Chase. Michael holds a Bachelor of Business Administration from the University of St. Thomas and an MBA from the Fuqua School of Business at Duke University.