When it comes to the performance of their working capital, companies aren’t making much progress. In fact, in 2013, the three components of working capital – receivables, payables, and inventory – showed scant change from 2012.
That’s according to the 2014 CFO/REL Scorecard that evaluated results from 997 non-financial US companies.
Yet many companies are held back by a number of internal challenges, not the least of which is the lack of access to real-time data and metrics needed to evaluate the effectiveness of working capital and improvements, according to a Deloitte study.
There are rich opportunities for CFOs and other financial leaders to use analytics and data discovery tools to discover new ways to improve the performance of working capital even while companies continue to build up their cash hoards.
For example, CFOs and other finance leaders can use both predictive analytics and data discovery tools to improve their visibility and control over working capital performance in real time. This is critical as only 22 percent of the respondents to the Deloitte study say they monitor working capital performance on either a daily or weekly basis.
The use of analytics and data discovery tools can help finance leaders better identify and respond to recent shifts in inventory and supply chain procurement as well as accounts payable and accounts receivables and evaluate how these areas are performing against forecasts.
Data discovery tools can also help finance leaders identify opportunities to act on these types of shifts in working capital. This may include pinpointing a slowdown in inventory turns in a particular region. Analytics can then be used to address the inventory slowdown by applying techniques such as making changes in pricing/promotions.