4 Strategies to Improve Working Capital

Working capital (current assets minus current liabilities) is an important gauge of your company’s financial wellbeing. In addition to determining liquidity and efficiency, working capital can be a reflection of the health of your organization’s AR program. In many cases, the need to improve working capital indicates a need to improve AR processes.

Companies that collect receivables too slowly often experience reduced cash flow, which limits the amount of capital available for day-to-day expenses and short-term liabilities. Consequently, one of the most valuable things finance executives can do to improve working capital is to address inefficiencies in the financial supply chain and accelerate the collection of receivables.

Tips to Improve Working Capital

Successful enterprises excel at the effective management of working capital. Without adequate cash flow, liquidity and current income, the payment of short-term liabilities can create unnecessary financial strain on the organization—drastically reducing its ability to take advantage of opportunities and investments.

At Direct Insite, we specialize in helping corporations leverage financial supply chain technology for business advantage. To improve working capital, leading corporations are turning to financial strategies that address accounts receivables and other activities that directly impact cash flow. These strategies include:

  1. Accurate Forecasting: Accurate forecasting across multiple timeframes lays a foundation for the management of cash flow and working capital. This means forecasting cash balances for both the short and long terms, and maintaining an awareness of current cash balances as well as estimating cash balances a minimum of six months into the future. Direct Insite’s PAYBOX® invoice automation platform enhances your organization’s forecasting abilities with real-time cash flow analysis and real-time reporting—features that are designed to help financial decision-makers better predict and optimize cash flow.
  2. Better Discount Management: Discounts incentivize buyers to pay invoices in a timely manner. They provide a financial benefit to buyers and are often an important resource for strengthening their relationships with suppliers. As a seller, effective discount management leads to shorter payment cycles, which delivers better cash flow, predictable payment streams and reduced profit loss to your organization. Direct Insite’s PAYBOX® platform increases your ability to leverage discounts for better cash flow by allowing you to manage invoices, invoicing and customer relationships from a single, convenient portal.
  3. AR Automation and Electronic Invoicing: Manual invoicing and AR processes are inefficient and risky. When corporations need to improve working capital, the decision to implement AR automation and electronic invoicing is an easy one. Direct Insite’s electronic invoicing, automated matching and workflow management technologies shorten the amount of time it takes to receive payment for invoices and increase discount opportunities—significantly increasing AR efficiency and cash flow.
  4. Cash Flow KPIs: Since cash flow directly impacts the company’s working capital position, it’s critical for company execs and other stakeholders to develop and monitor working capital and cash flow key performance indicators (KPIs) for each department. By increasing visibility to financial supply chain metrics, Direct Insite equips your organization with the tools you need to improve working capital and your company’s overall financial position.

Improve Working Capital Management with Direct Insite

Direct Insite has the technology and expertise to help growth-minded enterprises significantly improve working capital management.

For more information or to schedule a private consultation, call us today at (610) 212-2487.

 

AR Strategies