How to Increase Financial Performance with Working Capital Programs

August 2, 2018
Daniel Shaffer
Working capital interview Edi Poloniato

Editor’s Note: Kyriba recently announced a record half-year in bookings growth and has seen an increase in demand for its working capital solutions. We interviewed Kyriba’s Edi Poloniato, Global Head of Working Capital Solutions, to find out how companies are benefitting from working capital programs like supply chain finance and dynamic discounting.

Why is working capital optimization more important than ever?

Improving working capital is a strategic objective for CFOs as they look to increase free cash flow and improve bottom-line value at their organizations.

We know from the financial crisis of 2008 that supply chain disruption can result in catastrophic operational decline. Now, 10 years later, new bank regulatory requirements and rising interest rates are limiting suppliers’ ability to borrow money to float their inventory costs. Market uncertainty is also increasing supply chain risk. Tariff wars, protectionism, and trade flow shifts are driving finance chiefs to ask their treasury teams how well protected they are against risk in their supply chain.    

How does Kyriba help to generate free cash flow and improve financial performance?

Our working capital platform is seeing rapid growth as global organizations brace for increased market volatility. Many of our clients are already taking advantage of digital transformation in their finance operations by deploying our reverse factoring technology. In Q2 2018, suppliers traded the equivalent of $1.884 billion in invoices on our platform compared to the previous year -- that’s well over a 60 percent year-over-year increase.  

We recently published a case study with Auchan, an international retail giant that leveraged Kyriba to improve working capital without impacting free cash flow. Where technology was concerned, Auchan was looking for a bank-independent solution that could cover multiple regulations, languages, banks, IT systems, repositories and currencies. Kyriba met all of their requirements and was the solution of choice.

You can read the Auchan case study to gain a full scope of the program benefits.

In short, Auchan was able to better manage global supplier financing operations in a multi-bank environment for more than 15,500 suppliers globally. The result was an impressive 47 percent increase in financing requests between 2016 and 2017.

How does Kyriba partner with its clients to offer a working capital solution?

Kyriba has a dedicated team that supports the enablement of buyers and suppliers from beginning to end. We engage our value engineering team (VAT) to help buyers understand how their investment in a reverse factoring program can improve free cash flow. The VAT is a specialized team of finance professionals who provide custom business case analyses for prospects of all sizes. They use a three-step process that encompasses value discovery, value monitoring and value realization. 

On the supplier side, we support the onboarding process and offer tools to maximize supplier participation. Our supplier portal gives suppliers added transparency into the payment process. They have the ability to see when their invoices will be paid, as well as decide if they want to select an early payment option, which generates efficiencies for both suppliers and buyers.

Kyriba’s early payment program improves working capital for both buyers and suppliers either by leveraging the buyer’s own excess cash, or by introducing a third-party funder who leverages the buyer’s credit relationships with banks for the benefit of the supplier.

Here’s how it works:

  • Buyers send their approved invoices on the Kyriba platform
  • Onboarded suppliers are notified when they can request early payments
  • Suppliers request early payments on a dedicated web portal
  • Funders make the early payments to the suppliers (invoice amount minus a discount)
  • Buyers repay the funder at maturity

In conclusion, what are the most important factors for a successful working capital program?

Free cash flow is becoming a key metric of corporate financial health, and is critical to improving the bottom line. Modern working capital solutions like Kyriba enable CFOs and senior finance leaders to hit their growth targets and reduce risk in the supply chain. Achieving these strategic objectives requires the following: experienced teams; a flexible, multi-funder platform; and intuitive, supplier onboarding capabilities to ensure maximum supplier participation.

Since most supply chains extend beyond local borders, it’s important to work with a solution provider that offers a cloud based, secure and truly international platform. These features will help when the company is ready to scale and it will increase the options to work with local subsidiaries that require localization. Of course, it’s not just the language support, but also the ability to adjust business rules easily through flexible configuration options by geography, by bank or individual suppliers. When all of these factors are delivered, the program is likely to be a success for the organization.

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