How to Make Your Supply Chain Pay Dividents in Working Capital
With supply chains, goods and services are exchanged in short time intervals, creating an opportunity for optimization. The right partners, tools and management in place can help reduce costs and increase capital through payments and receivables.
What, exactly, is supply chain working capital?
Working Capital = current assets - current liabilities.
Current assets generally include cash, inventory and accounts receivable (i.e., any money owed to you from customers you’ve served).
Current liabilities include accounts payable – the money you owe to vendors who support your supply chain. This includes payments to truckers and ocean carriers, custom duties and warehouse charges.
How do you maximize supply chain working capital?
- Get paid fast
- Pay others on favorable terms
- Maximize the return
Great, but what does that look like in action?
- Generate invoices via efficient electronic solutions to shorten the payment cycle
- Use automation to expedite transfers so customers remit payment faster
- Increase AR proficiency by matching purchase order price to invoice receipt
- Negotiate supplier terms to increase days payables outstanding, earn more interest and capture passive income
- Smartly use credit to maximize working capital liquidity
How do you make it happen?
Leverage your partnerships with banks, financial institutions and advisors to help shape your approach:
- Learn cash management best practices
- Implement integrated solutions to automate receivables and payables
- Set credit terms and interest earnings power to create the most favorable equation for supply chain working capital