How can finance leaders improve working capital with spend analytics?
March 15, 2023
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5 min
Improving working capital is a top priority for many finance leaders. Working capital is a measure of a company's efficiency and financial health, and it is calculated by subtracting current liabilities from current assets. A high level of working capital indicates that a company can pay its short-term debts and expenses, while a low level of working capital may indicate financial distress.
One effective way for finance leaders to improve working capital is by using spend analytics. Spend analytics involves collecting and analysing data on an organisation's spending habits, including data on vendors, contracts, and expenses. Spend analytics lets you get insights into your cashflow with third-party suppliers. The analytics can help you understand how much cash is being spent on paying suppliers within 30, 60 or 90-day cycles. This information can be used to identify patterns, trends, and areas for improvement.
This guide will teach you how to use your spend data to transform your business for profitable growth.
Download our free Low Risk Low Value (LVLR® ) framework to get complete spend visibility and achieve over 20% reduction in costs.
Download our Category Management Optimiser Checklist that has helped business leaders monitor and improve the effectiveness of their existing spend categories and subcategories enabling them to add millions to their bottom line.
Here are five ways finance leaders can use spend analytics on improving working capital:
1. Identify opportunities for cost savings: Spend analytics can help finance leaders identify areas where the company is over spending, such as paying too much for goods or services or using inefficient processes. By identifying and addressing these areas, finance leader scan reduce costs and improve the company's bottom line.
2. Negotiate better deals with suppliers: Spend analytics can help finance leaders understand the company's purchasing pattern sand negotiate better deals with suppliers. For example, if the company is spending a large amount on a particular type of product or service, finance leaders can use this information to negotiate a bulk discount or a longer-term contract.
3. Improve cash flow management: Spend analytics can help finance leaders understand the company's payment patterns and identify opportunities to improve cash flow management. For example, finance leaders maybe able to negotiate longer payment terms with suppliers or implement a more efficient invoicing process to improve cash flow.
4. Reduce the risk of fraud and errors: Spend analytics can help finance leaders identify unusual or questionable spending patterns that may indicate fraud or mistakes. By identifying and addressing these issues, finance leaders can reduce the risk of financial losses and improve the company's financial health.
5. Monitor and track spending: Spend analytics can help finance leaders monitor and track spending in real time, providing a more accurate and up-to-date view of the company's financial position. This can help finance leaders make more informed decisions about the company's financial strategy and improve working capital management.
In conclusion, spend analytics is a powerful tool that finance leaders can use to improve working capital and enhance the company's financial health. By gaining visibility into a company’s spend, finance leaders can identify opportunities for cost savings, negotiate better deals with suppliers, improve cash flow management, reduce the risk of fraud and errors, and monitor and track spending in real time. By leveraging the insights from spend analytics, finance leaders can make more informed decisions and drive business growth.
With traditional cost-cutting measures failing to drive business growth, finance leaders are discovering a new approach to cost control and growth — one that is focused on data-driven decision-making and continuous improvement.
With Spend Analytics, finance leaders can achieve greater accuracy in their budgeting and forecasting processes, which can lead to improved financial performance for their organisations.
In today's uncertain economic environment, Spend Analytics emerges as a transformative solution for finance leaders to meet the imperative of driving business growth.
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