Working Capital Analytics

What is working capital analytics?

The working capital analytics definition covers the data-driven approach to analyze, understand, monitor and maximize an organization’s short-term assets, which include cash, inventory, receivables, and minimize liabilities.

What are the core metrics tracked in working capital analysis?

Key working capital metrics that are tracked in working capital performance analysis include:

• Ratios such as working capital ratio, current ratio vs working capital, liquidity ratio, efficiency ratio
• Days Sales Outstanding (DSO), or the time taken to collect customer payments
• Days Payable Outstanding (DPO), or the time taken to pay vendors and suppliers
• Days Inventory Outstanding (DIO), or the time it takes for inventory to be sold
• Cash Conversion Cycle (CCC), the total time it takes to convert inventory and receivables into cash.

What are the types of working capital data analytics?

Three primary types of working capital data analytics include:

• Descriptive analytics that look at historical data to find patterns in past performance
• Predictive analytics that forecast future trends in cash (shortages and surpluses) and demand
• Prescriptive analytics that provide recommendations for action in areas such as payment terms, inventory levels, and credit limits

What are the benefits of using AI in working capital management analytics?

AI-led working capital analysis tools deliver significant positive outcomes including

• Cash flow optimization
• Accurate working capital reporting and working capital forecasting through efficient working capital dashboards
• Streamlining of inventory management with precise demand predictions
• Efficient management of accounts payable and accounts receivable
• Effective simulation of financial scenarios and risks

What are some good practices in analyzing working capital?

The first step to establish an effective working capital management strategy is to set clear objectives. Next is to review the current strategy and take the necessary steps to align with business needs — including identifying working capital inefficiencies and areas of improvement. Once these are identified, it is important to choose the right working capital management platform and working capital analytics software to keep the organization future-ready.