Category Archives: Financial Management

Healthcare Financial Trends for 2022

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The trajectory of the COVID-19 crisis suggests a long-tailed recovery. The latest financial data reveals the ongoing challenges.

The trajectory of the COVID-19 crisis suggests a long-tailed recovery. The latest financial data reveals the ongoing challenges.

COVID-19 continues to dominate the headlines, and its massive influence on healthcare will extend throughout 2022. At the same time, longstanding issues demand attention. CommerceHealthcare® recently completed its annual market scan and analysis of leading issues in finance and revenue cycle management (RCM). Healthcare Finance Trends for 2022 detail eleven trends that carry significant implications for the economic and operational wellbeing of health systems, hospitals, and physician practices.

Another Year of Financial Recovery

The trajectory of the COVID-19 crisis suggests a long-tailed recovery. The latest financial data reveals the ongoing challenges.

  1. Margin/Profitability. More than a third of hospitals maintained negative operating margins during 2021. Estimated total industry net income loss was $54 billion and median margin 11% below pre-pandemic levels. Hospitals paid an additional $24 billion for clinical labor during the year, $17 million for the average 500-bed hospital. Medical practices have suffered as well. Under 30% of surveyed primary care practices reported being financially healthy.
  2. Revenue and Volume. An encouraging but decidedly mixed picture emerges on the demand side. Through August 2021, overall healthcare spending was 7.2% higher than the previous year, distributed as displayed in Figure 1. Spending has lagged GDP growth. Hospital revenue grew, but volume of overall discharges and emergency department (ED) visits remains depressed from 2019 and flat for OR minutes. The longer-term utilization outlook sees inpatient volume decreasing 1% through the end of the decade, outpatient rising 14% and ED growing 5% for emergent and falling 15% for urgent.
  3. Cash/Liquidity. This metric was bolstered by COVID-19 government subsidies and expedited insurance reimbursements. Disciplined cash management will be required as these supports are removed. In fact, a recent article detailed an emerging liquidity challenge. Major insurers are behind on billions of dollars in payments for various reasons.7
  4. Medical Cost Trend. Another closely watched indicator is growth in employer medical costs. Forecasts for 2022 include:
    1. PwC: 6.5%8
    2. Willis Towers: 5.2%9
    3. Aon: 4.8%10
Health spending by category

Health spending by category

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Read more at Healthcare Financial Trends for 2022

The changing role of the CFO in a post-Covid-19 world

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The changing role of the CFO in a post-Covid-19 world

The changing role of the CFO in a post-Covid-19 world

Pre-Covid-19, CFOs primarily focused on reporting historical financial performance. But today, with rising logistics costs, supply chain bottlenecks, escalating input costs, and the uncertainty of sales, developing a forward-looking perspective is a must, write Chee Wee Teo, Huan Gao and Adam Mokhtee from Alvarez & Marsal.

In the months and years ahead, the CFO role must significantly evolve to keep up with the ever-changing Covid-19 environment. To be successful in the role, CFOs need to apply predictive thinking, adopt a greater strategic view, and increase their focus on forward risk assessment and contingency planning.

Develop a forward-looking perspective

Traditionally, finance teams spent 80% of their time on reporting results and 20% of their time on forecasting. In a Covid and post-Covid world, that ratio needs to shift toward a forward-looking approach that will better prepare companies to respond to unexpected events.

With this new approach, the CFO’s conversations with the CEO and the board will center on what could happen in the future. For the CFO who is accustomed to relying on historical data, this may be an uncomfortable transition, but it’s vital for the changing role of the effective CFO.

Digitize the finance function

Although digitizing processes has always been necessary for efficiency, the digitization offorecasting has become especially crucial. Leveraging digitization for predictive analytics can help anticipate challenges ahead and allow companies to stress test their business plans.

In some companies, the CFO manages the finance team while the Chief Digital Officer leads the data analytics effort. We strongly encourage the finance function to collaborate with data analytics so that the CFO can develop a predictive, forward-looking view of where the business can go.

The following should be digitization focus areas:

Customer focus:

Build a profile of key customers, their cadence in ordering products, consumption pattern and liquidity situation.

Production and inventory management:

Establish a robust production system (that captures the right production costs) all the way through to an effective sales fulfillment (that delivers the right product to customers at the right time witminimal production waste and inventory leftover). These interdependent processes are typically filled with manual touchpoints and subject to human judgement. This can be significantly augmented with digital tools to drive optimization.

Read more at The changing role of the CFO in a post-Covid-19 world

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Covid liquidity pressures place supply chain finance in the driving seat

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Picture: SUPPLIED/INVESTEC

Covid liquidity pressures place supply chain finance in the driving seat

The case for supply chain finance is as strong as ever

Not only did shipping and air freight supply chains come to a halt during the early days of the pandemic, but consumer demand also went through a slump. As a long-term consequence, supply chains have experienced strain, centered on working capital and ensuring business continuity across industry segments.

Today, the challenge is about demand, which exceeds timely supply, placing additional operational pressures on these businesses. This means supply chains are forced to stretch their working capital and make changes to how they finance and sustain their businesses.

According to the World Bank, there is a finance gap of about $5.2-trillion globally — wider in emerging markets where the availability of working capital has been limited or the understanding largely undervalued. As a result, we have experienced many product shortages, a prime example of how buyers and suppliers are facing the challenge to ensure the smooth exchange of products along the value chain.

Finance plays a big role in this continuity and in SA. While we lagged global markets in the adoption of supply chain finance models initially, the pandemic has strengthened the need for it. There has been a rising demand in supply chain finance locally — or reverse factoring as it’s commonly known — with some of the world’s largest businesses turning to this financing to help suppliers optimise their working capital.

However, supply chain finance is not a new concept. Globally, it has been used as a source of capital by many corporates as an alternative funding model to free up cash flow without affecting existing lending facilities.

Supply chain finance plays a pivotal role in markets in a state of flux, ensuring there is speed and efficiency in the payment cycle. Typically, a third-party finance provider will pay a buyer’s debt to the supplier at a discounted rate and much sooner than the buyer is able to do so if done directly.

This facilitates a positive cash flow for the business through the working capital cycle and ensures both buyer and supplier are better able to meet demand vs supply without the red tape of cash flow challenges typically experienced in a recovering market. It gives the buyer time to streamline cash flow, based on creditor cycles, where they pay the finance provider at a later date, allowing them room to ensure solid cash flow and build positive relationships with their suppliers.

It also offers a competitive advantage for the buyer and a financially savvy opportunity for the supplier to take advantage of mechanisms for early settlements and the related discounts that may apply.

Read more at Covid liquidity pressures place supply chain finance in the driving seat

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Personal Financial Management Tool Market by Major Vendors, Share Leaders, Types, Applications, Demand, Forecast To 2028

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Personal Financial Management Tool Market by Major Vendors, Share Leaders, Types, Applications, Demand, Forecast To 2028

Personal Financial Management Tool Market by Major Vendors, Share Leaders, Types, Applications, Demand, Forecast To 2028

Personal Financial Management Tool and credit insurance is an effective way for enterprises, insurance companies, governments and other departments to make credit insurance a big risk diversification and transfer under the financial and credit system.

Adding new data streams rises transparency of Personal Financial Management Tool in real time, further combining data from the physical and financial supply chain. This allows reducing the requirement for trust by reducing counterparty credit and performance risk, offering new trade finance solutions with innovative trigger points and overall better services for the consumer.

This Personal Financial Management Tool market research is an intelligence report with meticulous efforts undertaken to study the right and valuable information. The data which has been looked upon is done considering both, the existing top players and the upcoming competitors. Business strategies of the key players and the new entering market industries are studied in detail.

Geographically, the segmentation is done into several key regions like North America, Middle East & Africa, Asia Pacific, Europe and Latin America. The production, consumption, revenue, shares in mill UDS, growth rate of Personal Financial Management Tool market during the forecast period of 2021 to 2028 is well explained.

This Report is a believable source for gaining the market research that will exponentially accelerate your business. SWOT and Porter’s five analysis are also effectively discussed to analyze informative data such as cost, prices, revenue, and end-users. The research report has been evaluated on the basis of various attributes such as manufacturing base, products or services and raw material to understand the requirements of the businesses.

Furthermore, it also offers a holistic snapshot of the market’s business sector. In addition, the market study is supported by significant economic facts with regards to pricing structures, profit margin, and market shares. To present the data accurately, the study also makes use of effective graphical presentation techniques such as tables, charts, graphs, and pictures. The report further also highlights recent trends, tools and technology platforms that are contribute to enhance the performance of the companies.

Read more at Personal Financial Management Tool Market by Major Vendors, Share Leaders, Types, Applications, Demand, Forecast To 2028

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The pros and cons of ‘supply chain finance’

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Coca-Cola does it. So does the global consumer goods group Procter & Gamble and discount store chain Walmart. In Australia, Telstra and construction group CIMIC are into it.

All are using an increasingly popular scheme known as “supply chain finance” to pay the companies that provide them with goods and services.

The old-fashioned method of paying invoices is simple. A company orders goods from a supplier. The supplier delivers them and issues an invoice with a due date, such as 30 days’ time. The company pays the supplier within 30 days.

Suppliers who have delivered their goods but want to get paid earlier than 30 days have also for many years had another option: approach a bank and sell 80 per cent of the invoice (typically the maximum the bank is prepared to buy) before the due date. The bank later collects the invoice payment.

This is known as debt factoring; the bank or financier that buys the invoices is called a factor.

In recent years, a third option has emerged. With the help of banks and financiers, big companies take the initiative and suggest payment options to their suppliers, giving the companies more control over when and how they pay invoices.

This latter scheme is most commonly known as supply chain finance or, more specifically, “reverse factoring” – a technical term commonly used by ratings agencies to differentiate it from conventional debt factoring.

Reverse factoring compared to normal payment terms

Reverse factoring compared to normal payment terms

In reverse factoring, the big company hires a bank such as JPMorgan or a financier such as London-based Greensill Capital to make agreements with its suppliers. The supplier gets to choose exactly when it wants to be paid the full amount of money it is owed, with payment dates as soon as 10 days after goods and services are delivered.

Banks and financiers team up with technology groups such as Taulia and Oracle, which insert technology known as enterprise resource planning software into the accounting systems of their customers.

Read more at The pros and cons of ‘supply chain finance’

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Samsung eyes blockchain technology to cut supply chain costs by 20%

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Samsung is targeting the introduction of blockchain technology that could reduce its global shipping costs by up to 20%.

Song Kwang-woo, vice president of Samsung SDS, the Korean multinational’s specialist technology arm, has revealed the company is investigating the possibility of using a blockchain ledger system to ‘fuel its digital transformation’.

By automating channels of communication both internally and with port authorities, it predicts that it will be able to improve efficiency by up to a fifth – potentially saving billions of dollars every year.

“It (blockchain) will have an enormous impact on the supply chains of manufacturing industries,” said Song, speaking to Bloomberg. “Blockchain is a core platform to fuel our digital transformation.”

Samsung works with approximately 2500 suppliers around the world, building relationships around five key criteria: cost competitiveness, human resources capacity, on-time delivery, response to risk and supplier competitiveness. SDS says it will handle around 488,000 tonnes of air cargo and 1mn TEUs in 2018 alone.

Last May, SDS launched a blockchain pilot to track imports and exports of shipments in Korea’s shipping sector, a trial that concluded at the end of the year.

Read more Samsung eyes blockchain technology to cut supply chain costs by 20%

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Big Data: The Latest Rage in Supply Chain Management

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Early uses of big data were concentrated in two areas: customer segmentation/marketing effectiveness, and financial services, particularly in trading. Recently, supply chain has become the “next big thing.”

Why? A company’s supply chain is rich with data, and it’s also a large cost component. Combined, those facts mean that advanced analytics can become a strategic weapon for optimizing the supply chain.

However, many companies can’t see the forest for the trees. They are optimizing, but not strategically. When applying data to supply chain, it’s critical to step back and look at what truly drives business value.

“They’re Digging in the Wrong Place”

As every fan of “Raiders of the Lost Ark” knows, Indiana Jones found the Ark of the Covenant first. The Germans had far greater manpower and resources and they were more efficient, but they were competently digging a hole in the wrong place. The same goes for using big data in supply chain optimization. You could have the most efficient process in the world, but if you’re making the wrong amount of the wrong product, it will hurt your business.

Read more at Big Data: The Latest Rage in Supply Chain Management

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King Trade Capital Provides Supply Chain Finance Solution to Startup

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King Trade Capital announced it has established a $1 million supply chain finance solution for a Texas based startup. KTC was contacted by a nationwide factor to help accelerate the startups sales growth in the apparel industry. The owners of the startup have extensive relationships with small to mid-size retailers and years of experience sourcing goods from overseas factories. Through their relationships in the apparel industry they were able to secure annual production programs to manufacture branded goods on behalf of several men’s and women’s brands.

Due to the fact the client was a newly established entity with no financial or operating history, they were unable to obtain funding through traditional financing sources. The client was in need of a financial partner capable of providing the capital and structure necessary to have fabric sourced and garments manufactured overseas.

Initially the client’s factories wanted cash deposits in order to purchase fabric that would then be cut and sewn into finished garments. Payment for the cut and sew operations would then be due upon shipment. The owners, knowledgeable of the risks associated with sending cash deposits overseas, were seeking a safer solution to finance their inventory purchases.

King Trade Capital evaluated the experience of the owner’s and their customer and factory relationships, ultimately gaining comfort in their ability to perform. After negotiating with the factories, King Trade Capital and the client were able to structure individualized solutions for each factory, utilizing letters of credit that allow them to purchase fabric, complete the cut and sew manufacturing process and get paid according to their terms with the Customers.

Read more at King Trade Capital Provides Supply Chain Finance Solution to Startup

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Monitor Financial Distress in Your Supply Chain

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While American manufacturing has experienced a resurgence in recent years, some manufacturers continue to face challenges. Witness for example the recent chapter 11 filings of Colt, Boomerang Tube, and Everyware Global. Sometimes, manufacturers struggle because a supply chain partner—a major supplier or customer—is struggling. In order to manage supply chain contracts, manufacturers need to watch for early signs of financial distress in their customer or supplier base. Then, they may quickly react to red flags and garner an advantageous position.

Trouble in the Supply Chain?

Manufacturers should watch for supplier requests to increase prices or accelerate payment terms. Similarly, cash-strapped customers may ask for financing support. In addition, a manufacturer’s deteriorating market position, failure to effectuate cost reductions, and changes in key management positions all may indicate financial distress. Manufacturers should employ tactics in order to secure continued supply when faced with a financially troubled supplier. By managing contracts after identifying a troubled supplier or customer, manufacturers can often mitigate risks, or even improve their positions.

Manufacturers should prioritize, understand, and address troubled supplier situations with advance awareness. That’s why companies should continually analyze their contracts to maximize leverage, and understand available legal options. To alleviate the pressures of financial distress, manufacturers should exercise common law and statutory remedies in order to purposefully tweak standard terms and conditions of new contracts (or negotiate changes to existing contracts). The terms of these contracts significantly impact the manufacturer’s ability to re-source production to a healthier supplier, recover tooling, and utilize certain remedies.

Read more at Monitor Financial Distress in Your Supply Chain

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Financing the Supply Chain with Big Data

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To many, supply chain finance still leans primarily on approved invoices and credit. And yet, over the past 15 years, there’s been a complete transformation in the way financial processes are handled within the supply chain. Fifteen years ago, letters of credit predominated the payment interactions between buyers, suppliers and financial institutions. Financing was arduous and expensive. Today, online, cloud-based platforms are revolutionizing both payment and financing.

Data is the driver. Today, we have unprecedented visibility into all the transactions and interactions that take place in the supply chain. The cloud, as a central information hub, not only can host these interactions and provide a real-time picture of them, but it can also keep long-term records.

This gives financial institutions what they always wanted—a better way to assess risk.

Big Data Financing

Credit rating was historically the key factor for financial providers to assess risk. In many cases, it’s the buyer’s credit rating that counts most, even when the supplier is the one receiving the financing. The problem with credit rating, though, is that it depends on a lot of factors, not just on how reliable a supplier is in delivering goods or how reliable a buyer is in paying on time.

But as far as risk assessment goes, proven transaction history is what lenders prefer to set their decisions and rates upon. But for the longest time, financial providers didn’t have a good way to assess risk independently of credit rating. Now, thanks to big data, they do.

Read more at Financing the Supply Chain with Big Data

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