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Working Capital Optimization: Why a Game-Changing Approach is Needed

This sponsored Viewpoint article has been provided by Taulia
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Game changers are easy to spot. They are the ones who want to make sure that tomorrow is better than today. They are the dreamers, the innovators, the ones who think the impossible is a challenge waiting to be bested. And in today’s competitive marketplace, it will be the game changer, more specifically, the financial game changer, who will stand out from the crowd. How will they do this, you ask? They will understand that working capital optimization is so much more than jargon.

Being a game changer means being able to identify opportunities that will transform your business. But transformation takes cash — a lot of it. Cash to fund research, cash to fund projects, cash to invest in infrastructure and support growth. The necessary funds, however, are not always readily available. Game changers understand that the opportunity that lies within the supply chain could help them soar. With more than $14 trillion currently trapped in supply chains, the opportunity to streamline and optimize working capital is huge. Layer this with improved supply chain health, confident suppliers and a happy accounts payable team, and the possibilities are endless.

So How is it Done?

Game changers know that there is much to gain by tackling working capital proactively. And it isn’t enough to make small improvements here and there: in order to succeed, you’ll need to go further than that and adopt a game-changing approach.

What does this mean in practice? Here we outline three simple steps that will make you a game changer:

1. Be the Game Changer

Don’t second-guess yourself: You are the game changer in your business. This means that you understand the need to innovate within your team and your department. Innovation in the financial sector means that you can move away from obvious solutions that only capture working capital benefit from a small number of suppliers to capturing benefit from the full spectrum of all of your suppliers.

Harnessing the power of emerging technology and, for example, using artificial intelligence (AI) to monitor early payment behavior across large numbers of transactions can lead to deep analysis of companies’ supplier payment files, which can, in turn, provide insights into opportunities to reduce finance costs across your supply chain.

Not only that, but you also will be able to use the information gathered from the thousands of invoices to make instant decisions — decisions that will positively affect foreign exchange (FX) hedging, options for investing and the building of strategic buying relationships.

2. Goals, Goals, Goals

Start any working capital project by setting out clear goals. To develop the right goals, you need the right understanding of your business and its operations. This takes diligence and data — lots and lots of data. For instance, how do suppliers invoice you? How do they contact you when it goes wrong? How do long does it take you to approve the invoice? What does your existing procure-to-pay process look like? And what should it look like?

A clear and well-defined invoicing process will simplify your conversation with suppliers. Mountains of paper can be eliminated in one fell swoop, and invoices become easier to manage and approve. Add on to the same platform the ability to take early payment and suppliers now only have one place to visit when dealing with your business. The result is that you are well on your way to achieving your working capital goals: you have eliminated hours of administration, distracting phone calls and you have happy suppliers. What more could you ask for?

3. Talk to Those Who Matter

Internal partners make the difference between success and failure. Creating a team that comprises procurement, treasury, finance, IT and legal will ensure that everyone has bought into the program and has a say in timelines, deliverables and priorities.

Add in senior sponsors from the C-suite who ensure that all teams have the program implementation as a priority and you can’t fail. Don’t forget, though: You still need a leader to bring these teams together and on track. That leader is you.

Often left to last, suppliers believing in your program is what makes it a success, and their continued belief in the program is what makes the initiative prosperous in the long term. Suppliers should be segmented through an outreach methodology based on an understanding of their needs. Some suppliers are so essential to the business that speaking to them and helping them understand the nuance of your program is much better than sending an email.

Don’t Stop

Sooner than you thought, you will have a well-running program. But your work doesn’t stop there. Take a well-earned pat on the back and put your nose to the grindstone again. There will always be new suppliers coming onboard and new ways to use the data to inform business decisions.

Want to become a game changer for your organization? Take the first step by joining Taulia at its Working Capital Summit, in San Francisco on October 10 or Chicago on October 18

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