Improving Working Capital Metrics and Receivables Cash Conversion Cycle

Corporate insolvencies are expected to grow in 2023 as energy prices, interest rates and direct lending costs increase. The faster companies can improve their cash conversion cycle, the less working capital will be required to support the business, and the higher the certainty of future cash flows.

In this KyribaLive 2023 session, Kyriba Working Capital Product gurus Tom Gavaghan and Moez Thameur explain how Kyriba’s Working Capital solution can accelerate the cash conversion cycle for global companies. With a focus on Kyriba’s recently launched product, Receivables Finance, the speakers review how Kyriba’s award-winning Working Capital solution can equip corporates with real-time, actionable working capital cockpits to convert their receivables into cash.

Exploring Kyriba’s Working Capital Solution

Launched in 2014, Working Capital Solution is an important component of Kyriba’s Enterprise Liquidity Management platform, providing the full spectrum of enterprise liquidity under one version of the software. It consists of five different products:

• Dynamic Discounting allows organizations to use their excess cash to early finance or early pay their supplier base in return for a discount.
• Supply Chain Finance lets organizations leverage a third-party funder to finance the suppliers, allowing all suppliers access to an early payment.
• With Hybrid Supply Chain Finance/Dynamic Discounting, organizations can toggle between third-party funding and self-funding solutions, depending on the cash position at any given point in time. When the corporate has excess cash, it can use that cash to early pay the suppliers, or alternatively, it can automatically push the funding request to a third-party financing institution. Thameur explains the “benefit of this product is really to make maximum usage of the corporate excess cash that might be cyclical. It could be deployed on demand and automatically to fund suppliers.”
• Purchase Order Finance offers financing possibilities at the purchase order level, allowing suppliers to be paid before an invoice has been approved.
• Receivables Finance, recently launched in 2022, lets organizations optimize cash flows by getting paid early for unpaid receivables from customers.

Both Thameur and Gavaghan emphasize all of Kyriba’s Working Capital Products are integrated in one dedicated Enterprise Liquidity Management portal, with the modules communicating with each other natively and underpinned by Kyriba Analytics as well as automated onboarding tools.

As Gavaghan states, “Kyriba provides everything as it relates to how we can impact your cash conversion cycle–whether it’s accelerating your receivables, delaying your payables, or taking advantage of dynamic discounting if you’re in a surplus cash position. We’re able to do this inside of a singular technology to again meet the different financial goals that your organization has in your own unique capital structure.”

Three Flavors to Optimize the Cash Conversion Cycle

Corporates can employ what Thameur terms the “three flavors of Kyriba’s Receivables Finance space” to optimize their cash conversion cycle.

The first flavor is securitization, asset-based lending, and pool financing. This feature extracts your entire receivables ledger from the ERP automatically, running eligibility checks, limit controls, trade credit insurer limits, and concentration rules in the platform, with the aim to offer Kyriba clients an available amount that could be drawn-down on a daily basis.

Since Kyriba extracts the invoices regularly, the availability will change almost in real-time, offering the possibility to do withdrawals and financing on a continuous basis. Thameur stresses, “We know that these actions are usually run through weekly or monthly drawdowns. With Kyriba, you can move to real-time drawdowns.”

The second flavor Kyriba supports is invoice discounting, which is a type of business funding that helps companies access the cash tied up in their outstanding invoices. Clients select which invoices they would like to offer, submit, sell, or finance. This short term funding option offers businesses a way to get the money they are owed by their customers faster, while still allowing the customer to pay at their own pace.

Factoring is the third flavor Kyriba clients can take advantage of to streamline receivables financing. Thameur terms factoring “a more automated way of extracting the full ledger, where all eligibility and limit checks are run automatically and then the financing requests are automatically pushed to the banks.”

Kyriba’s Receivables Finance is fully integrated with the rest of the the liquidity platform, and Thameur stresses, “You’ll have more certainty, more precision into the forecasts and obviously, the receivables forecasts will feed into your liquidity planning module, your cash management module. Again, it’s the beauty of the enterprise liquidity platform where everything talks to each other.” Gavaghan adds, “When it comes to receivable financing, again, there’s different flavors that we support to adapt to your own credit, to your own buyer’s credit, and your funding arrangements.”

Discover the Power of a Connected Solution

These three flavors of Receivables Finance are underpinned by Kyriba’s core platform connectivities, which is one of the biggest differentiators of the Kyriba platform from many Fintech vendors.

One the one hand, Kyriba is ERP agnostic and offers a large selection of pre-built ERP connectors, with dedicated connectors for SAP, Oracle, and Microsoft Dynamics 365. Simply download and install an SAP-certified or an Oracle-certified plugin and data will start flowing back and forth from your ERP to Kyriba.

On the other hand, Kyriba is multi-bank by design and provides a new user experience that centralizes KPIs, allowing users to monitor and run many programs in one centralized dashboard, so as Thameur points out, “You can consolidate all your regional programs into one platform, offering consistency and standardization in the way you discuss and talk with your banks.”

With the support of this powerful connectivity platform, Kyriba Receivables Finance can automate the accounting feed to the ERP. Thameur explains, “With Kyriba, you can automate the full journey end to end. From invoice extraction up to pushing the transactions to your banking partners and all the way back to the ERP. Our platform also provides AI-assisted predictive analytics to provide information about when your receivables collections will be made, how much money will be collected, and on what frequency.”

In a follow-up product demo, Thameur shows “how easy it is to extract data directly from your SAP, your Oracle, your Microsoft Dynamics. By installing the plug-in, information will fly to Kyriba,” and Gavaghan emphasizes, “What’s really important is that it’s a full integration. What’s important as it relates to these programs is that we’re taking an interface of your invoice activity, but we’re also communicating back out the status of what’s happening with that invoice.”

As part of the product demo, Thameur also highlights how Kyriba’s use of React technology, a JavaScript-based UI development library, allows for a seamless user experience from any device.

Whether it’s monitoring and checking the limits for buyer/salary relationships for trade credit, insurer relationships, or country exposure relationships, Thameur emphasizes the power of Kyriba’s connected solution also comes from the integrated risk management module that handles real-time FX exposure management. Again, users can monitor everything in one dashboard.

Mastering the Cash Conversion Cycle

In summary, Kyriba’s comprehensive working capital solution allows businesses to access funds that are tied up in unpaid accounts receivable and transforms these assets into cash by providing a seamless integration with corporate ERP systems. Leveraging integrated multibank connectivity, sellers can consolidate all receivables finance programs into a single user-friendly portal. The user-friendly interface lets users carry out receivables sales, inquire about limits, or request drawdowns from multiple credit facilities.

As Gavaghan explains, “We’re taking the actionability of Kyriba and putting it in your hands. I like to call the levers. It’s not just about seeing information as it relates to your liquidity, it’s then taking actions on that liquidity to make the important decisions–whether it’s delaying your payables and impacting your DPO or whether it’s accelerating your receivables and reducing the days receivable. We have those levers ready, and I think that’s truly differentiating in the market.”