An organization with inadequate working capital cannot pay the day-to-day expenses of its operations, and it creates inefficiencies, increases costs, and reduces the profits of the business in the following ways:
Organization X has incurred significant costs in the most recent financial quarter, leaving it with $450,000 in current assets. It has inadequate working capital of $200,000 due to its current liabilities of $650,000.
It indicates that the organization would suffer if it had to pay off its short-term debts. To pay its debts, the company must try to push through sales or borrow for the short term. This depletes the company’s resources for future growth and investment.
AI-based working capital solution ensures that a company effectively gains greater visibility over its cash and can make confident and timely decisions, focusing more on strategic activities.
AI and machine learning working capital management tools have progressed to the point where CFOs can now deploy them to provide much-needed automation, efficiency, and accuracy to their forecasts. AI-based working capital management tool provides the following benefits for the CFOs:
In a recent EY survey, more than 58% of CFOs felt they do not have enough time to properly develop and define strategic decisions.
CFOs now need to play a pivotal role in working capital management which generally comprises three key areas: payables, receivables, and inventory. AI-powered solutions can help make each process more efficient and profitable.
AI working capital management tools enable the treasury department to stay on top of changing circumstances and macroeconomic variations that would otherwise go unnoticed.
CFOs can ensure enough cash is available for upcoming opportunities and unanticipated occurrences by creating a consistently high level of working capital management. Additionally, it helps them meet short-term liabilities and provides CFOs more control over how they manage their operations.
Autonomous treasury solutions allow CFOs to allocate idle funds efficiently. Extra funds might be utilized to expand or restructure the business, buy new products, pursue global markets, or go for mergers and acquisitions. Therefore businesses can achieve a competitive advantage alongside a plan for the future.
For instance, a professional employer company had no dedicated cash forecasting process and made decisions based on limited information and intuition. After leveraging HighRadius’ AI-based treasury solution, they could make better decisions on M&A along with the overall increase in efficiency and better resource utilization.
Only when areas such as A/P and A/R are running smoothly can a company maintain sufficient working capital. AI-enabled working capital solution improves A/R and A/P forecasts by performing historical analysis to identify the historical trends and predicting customer-specific payment dates by supporting many customer and invoice-level variables.
Bottom-up forecasting approach results in high global cash flow visibility. This enables corporates to stay ahead of the curve by having easy and continuous access to data in a single repository.
AI-based cashflow projection system detects deviations which helps understand the forecasts’ accuracy. Additionally, to increase cashflow projection accuracy by up to 95%, the cash forecasting software uses a feedback loop model that examines previous and present results and modifies projections accordingly.
The HighRadius™ Treasury Management Applications consist of AI-powered Cash Forecasting Cloud and Cash Management Cloud designed to support treasury teams from companies of all sizes and industries. Delivered as SaaS, our solutions seamlessly integrate with multiple systems including ERPs, TMS, accounting systems, and banks using sFTP or API. They help treasuries around the world achieve end-to-end automation in their forecasting and cash management processes to deliver accurate and insightful results with lesser manual effort.