Technology-Driven Solutions for Working Capital Management

Every day, strategic decisions must be made to monitor, assess, protect and optimize your company's cash flow.

However, the burden of fragmented data and outdated, time-consuming processes can hamper your ability to effectively manage your company's working capital.

With rising interest rates, high market volatility and economic uncertainty preoccupying many, it is now essential to implement actions to protect balance sheets, anticipate cash flow needs and rationalize operations to gain greater control and visibility.

Working capital management is a pressing issue. Business leaders and finance teams must leverage the accounting and finance technology power available to maximize efficiency and improve operations.

The importance of working capital management

Working capital is a reliable key performance indicator (KPI) that chief financial officers (CFOs) should pay attention to. This ratio, which is your current assets/current liabilities, is a faithful indicator of the short-term financial health of your company.

By considering current assets and liabilities, you can determine your net working capital to gauge how much money is available to meet your current expenses. It gives you critical insight into your finances, money cycle, and assets to make the right decision and improve your overall strategy.

Why is working capital management critical right now?

In today's economic climate, managing your working capital with an iron fist is essential to operating efficiently and remaining competitive. After all, cash flow is the ultimate driver of value, and the risk of neglecting effective working capital management is hard to pay.

Particularly in times of economic downturn, with increasing insolvencies and rising interest rates, cash must be plentiful and accessible for unexpected expenses and needs. Not surprisingly, CFOs try to factor their receivables or sell their accounts receivable to optimize their cash flow.

According to Johannes Wehrmann, Managing Director of Corporate Sales at Demica, a supply chain finance platform provider, more and more companies are now looking for working capital finance facilities.

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Managing cash more efficiently and paying off higher debt by selling receivables is the best solution, and effective working capital management is the best ally to implement this strategy.

How Technology Optimizes Working Capital Management

Now more than ever, business leaders need to foster resilience and agility within their organizations to help mitigate potential current or future risks.

Keeping track of your finances, managing your order-to-cash cycle, reducing Days in Sales (DSO), and knowing the status of your money are essential but time-consuming.

Using technology to streamline these processes is a game-changer.

With the right software, you can automate accounting operations, provide financial analysis and decision-making tools, and improve communication and collaboration. It can save you valuable time and money by reducing the need for manual data entry while improving accuracy. It also makes financial forecasting and budgeting easier and tackles the burden of fragmented data to ensure everyone is on the same page when it comes to financial matters.

Here are some benefits of using technology to improve your working capital management.

Data Aggregation: For multiple businesses, financial data is dispersed across multiple platforms, including spreadsheets, manual or digital documents, email correspondence, and accounting or ERP platforms. The introduction of new technology solutions brings all of this data together in one platform, giving you and your team a clear view of the financial health of your business. This improves working capital management at all levels of your organization. Promote analytics and automation: Technology enables you and your teams to automate manual tasks and gather more accurate and up-to-date working capital management data and insights for your business . What kinds of KPIs should CFOs monitor?

Companies that leverage technology and data to manage their working capital can improve their bottom line. According