Working capital is crucial for businesses in today’s volatile economic scenario. In fact, in a recent article, John Stevens, Kyriba’s SVP and Global Head of Capital Markets, Financial Distribution & Working Capital, emphasized that its strategic importance has never been higher.
Thus, understanding its nuances is essential for any financial professional, as it enables the seamless flow of information that empowers treasurers to make informed decisions, allows accounts payable managers to transform cost centers into strategic assets, and gives CFOs the confidence to navigate turbulent economic waters.
Core Strategies to Optimize Working Capital
Stevens notes some core strategies for optimizing working capital, all of which can be enhanced through the power of ERP:
- Supply Chain Finance (SCF): It allows suppliers to get paid earlier at favorable rates based on a company’s creditworthiness amid complex global supply chains. This strengthens an organization’s supply chain by providing suppliers with much-needed liquidity, while allowing buyers to extend payment terms. The ERP system can be configured to manage the data flows between a company, its suppliers, and the financing institution, and thereby automating the payment process.
- Dynamic Discounting: This strategy enables organizations to present early payment to suppliers against a discount on their invoices. It lowers the cost of goods sold, and suppliers get quick access to cash. They are then integrated into Kyriba’s platform to apply these discounts effectively. An ERP can calculate the potential savings based on the negotiated terms, making it a seamless and efficient way to boost the bottom line.
- Receivables Finance: This enables organizations to sell outstanding invoices to a third party at a discount, providing them with immediate access to cash. A more advanced form of this is factoring, where organizations sell their entire portfolio of accounts receivable. An ERP can automate invoice management, which includes the generation sending and tracking of invoices. When integrated with a partner like Kyriba, organizations receive real-time data on accounts receivable, making it easy to identify which invoices to finance and to track the whole process from start to finish.
- Hybrid Solutions: A hybrid approach, combining different working capital solutions, can offer considerable flexibility. For example, a business could utilize a combination of supply chain finance and dynamic discounting, switching between third-party funding and its cash reserves as needed. Or a company might use factoring to accelerate cash collection from its customers while using supply chain finance to extend payment terms to its suppliers.
Stevens concludes that by adopting a strategic approach to working capital optimization and leveraging the capabilities of an ERP system, organizations can unlock a substantial amount of cash and enhance their financial performance.
What This Means for ERP Insiders
The market demands intelligent integration. Today, it’s no longer enough to have an ERP connected to other systems. Leading organizations are leveraging cloud platforms and real-time APIs to enable agentic AI and predictive analytics. This means an organization’s ERP should not just report what happened, but actively anticipate needs, automate decisions, and provide proactive insights for financial planning and analysis. The focus has shifted from batch processing to a live, intelligent financial ecosystem.
Specialized platforms are key to unlocking ERP data value. An organization’s ERP is the single source of truth for transactional data. However, to fully monetize it for working capital, organizations need specialized applications. For example, Kyriba utilizes real-time ERP data to drive use cases such as dynamic discounting and supply chain finance. These are powerful platforms that transform the payables and receivables data locked in the ERP into actionable liquidity events.
Turn uncertainty into advantage with integrated intelligence. An integrated ERP suite enables businesses to capitalize on market uncertainty and turn it into a competitive advantage. By combining the transactional power of an ERP with the scenario modeling and forecasting capabilities of a Treasury Management Solution (TMS) like Kyriba, companies can enable liquidity forecast and run what-if scenarios in real-time. Thus, instead of reacting, a finance team can model the financial impact instantly and make proactive, data-driven decisions that protect the company’s cash flow and stabilize its business.
