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Improvements in working capital management will enable all organisations to create value and enhance the way they operate. According to PWC, there is €1.2tr of excess working capital tied up on balance sheets. Those who release the blockages which hide this capital will be able to boost growth and create more potential for investment.
Evaluating and structuring the programmes designed to release working capital can be a complex process and may involve many parties with different priorities. Technology can mitigate the operational risk associated with manual analysis and structuring, as well as improving visibility and unlocking potential. However, industry experience and a refined process to support the technology is every bit as important.
This blog discusses the problems and solutions involved in launching new working capital programmes, and how to reduce risk and secure better outcomes for all parties through a combination of technology and a detailed systematic process.
Challenges in working capital programmes
Anyone involved in working capital finance programmes will almost certainly have experienced the frustrations of trying to see things clearly enough early enough. This is necessary to support effective structuring for ongoing management, and to avoid the risk presented by poor practice. In the early stages, many issues can trap decision-makers in an endless loop of inertia, indecision and over-analysis. When the programme is incepted, disjointed processes, the inability of debtors to see the behaviour, and changes in the risk profile are commonly cited as some of the main challenges faced in this sector. For example:
Systematic analysis and technology
Recently, many column inches in the trade press have been devoted to the coming together of finance and technology. The world of finance certainly operates more efficiently when using new technology solutions, with more accurate results and a better experience for users. However, if technological innovation is based on a disjointed process, you are simply automating a bad process which will yield inaccurate results.
To unlock the potential in working capital programmes you need to be able to:
The only way to achieve this is to have highly refined technology able to evaluate the portfolio, operated by people with years of experience in the industry. This combination of technology and experience enables all parties to implement the programme and the right protection against operational and financial risks. The result of this combined power means that everyone involved in the programme is well positioned for accelerated growth.
At a time when so much working capital is locked up and businesses are under pressure, this can be a powerful solution to many of the problems we are about to encounter.
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
Ruchi Rathor Founder at Payomatix Technologies
10 September
06 September
Alexander Boehm Chief Executive Officer at PayRate42
05 September
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