A number of CFOs plan to slow down their payment of vendors in a bid to preserve cash as the coronavirus continues to spread and a global economic crisis takes hold. At the same time, most are confident they can make critical payments for at least 90 days.
According to Gartner, 36 percent of CFOs said they’ll pay bills at least 30 days late, or not at all. About 56 percent anticipate making payments on time. Fifty-seven percent of large companies, those with over $500 million in revenue, that have credit lines are actively drawing them down. Meanwhile, the CFOs of smaller companies are often delaying rent or vendor payments.CFOs plan to slow payments of vendors as the #COVID-19 spreads cash concerns and a global economic crisis takes hold. #HRTech #HR Click To Tweet
Much of this is the result of an economic vicious circle: Organizations are worried about paying their bills because their customers aren’t paying their bills.
“The COVID-19 crisis is exposing the fault lines between larger, better-capitalized companies which have more operational flexibility, and smaller firms under more stress,” said Alexander Bant, the Gartner Finance Practice’s vice president of research.
Cash Concerns are King
Since the COVID-19 pandemic began, CFOs have been keeping a close eye on cash flow, cutting costs and revising their supply chain strategies. Among their approaches: prioritize cash spending, evaluate credit options and weigh further budget reductions. In late March, Gartner said CFOs were paying more attention to the behavior of their customers and suppliers, as well.
There’s some good news for smaller vendors, Gartner said. Many CFOs are expediting payments to “more vulnerable” suppliers in order to prevent disruptions.
Indications are that many organizations are willing to spend money in areas that help them keep the doors open, including the HR technology needed to manage their workforce. This includes investing in virtualization and tools that will help maintain the engagement levels of both on-premise and remote workers. For example, Deloitte recommends expanding the use of technology that supports digital collaboration and presents data to measure and improve performance.
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