As reported in today's Wall Street Journal, as of the end of March, cash made up 7% of all company assets - the highest level since 1963.
Its a fascinating article, here, describing the reasons behind so much cash on hand.
For AP departments (and providers to the AP industry as well), the notion of dynamic discounting was starting to take off, then completely dropped off everyone's radar, when credit markets froze and corporates began conserving cash as best as they could. This "cash conservation notion" brings us to where we are today - record levels of cash. But it crippled the thought of dynamic discounting being any sort of actionable initiative in supply chain or AP.
As described in the article, companies are starting to recognize that so much cash on hand depresses shareholder returns. So while cash conservation will continue, companies also need to deploy that cash appropriately.
With the favorable returns that a dynamic discounting program can generate, I have to believe this initiative could gain some meaningful traction in 2010. Thoughts ?
2 comments:
There is certainly a new buzz about dynamic discounting and you comments are quite right. Dynamic Discounting is a very attractive way to deploy cash.
Paul, you are absolutely right we are seeing the topic gaining momentum right now.
During the financial crises, big companies extended payment terms while cost-saving measures such as e-invoicing and AP automation shortened the approval cycle. Now a lot of large companies are cash rich while smaller supplier have still have difficulties finding financing - so all elements are in place!
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