Opinion: Expert’s working capital management strategies

working capital management

Last April Adhip Ray published a blog on ‘Winning the Business’ regarding several working capital management strategies that experts use to run their business. His summary: there are two different kinds of working capital managers: the conservative one and the aggressive one. A very interesting article with lots of precious information, but we at NCN Capital are convinced we can add an extra kind of working capital manager to the list: the innovating working capital manager. Why? Let us introduce you to our opinion!

Contrasting strategies

Ahdip Ray is a start-up consultant and founder of a start-up consultancy company. He also writes blogs and articles on several business publications. For his article ‘5 experts’ working capital management strategies that you can use’ he interviewed a few CEO’s, founders and operations managers about their opinion about the best working capital management strategy for your business.

They came up with 5 different strategies:

  1. Plan for the future and keep an emergency safety fund for unanticipated businesses
  2. Process transactions faster to improve your business’ cash efficiency and conversion cycles by automating the processes i.e. by using an electronic payable and receivable system
  3. Track the right KPIs for your Working Capital to stay one step ahead of your competitors
  4. Get rid of unnecessary debts and keep an adequate amount of cash to be able to act flexible and adequate
  5. Improve your business liquidity to easily seize any opportunities that may arise as well as face-off unexpected hurdles

Based on these advised strategies Ahdip divides the working capital managers in two groups: an aggressive working capital manager and a conservative working capital manager. The more we thought about the advices, the more we were convinced that we can add a third group: the innovative working capital manager.

Innovation is key

To keep your business running you have to keep innovating. There are several ways to innovate and improve your business. Two of them is by optimizing your working capital and by improving your supplier relationships. That’s why we call the third group the innovative working capital manager. Why? And especially how is one innovating?

Optimizing working capital by dynamic discounting

By optimizing working capital, a company can get rid of unnecessary debts (advice 4 in the article.) Using a dynamic discounting system and automating the payment process (advice 2) the company not only limits the outstanding debts, but even got more cash left. The sooner the suppliers want their bills being paid, the higher the discount the company receive. This way of dealing with suppliers bills is an asset in improving the company’s supplier relationships. As suppliers receive their money sooner the company helps them with improving their business liquidity (advice 5).

In other words… the supplier gets in control to manage their own liquidity needs. And instead of leaving cash at the bank at low interest rates, the company invests in their suppliers. Win-win isn’t it?

How to start with being an innovative working capital manager?

Enough said, time to take action. Start being an innovative working capital manager! How? By giving us a call at …. or a message via our contact form. Our team will help you find the best solution for your business.  

About NCN Capital

NCN Capital is a ground-breaking working capital platform. Our core is making a difference in the financial sector by combining high-tech solutions with high-touch services. We create new opportunities and break through entrenched patterns in the financial sector. Our main goal is to optimize your financial supply chain. Let’s cash flow!

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