When talking about working capital management, most of the companies refer to Key Performance Indicators (KPIs) such as days in stock (DIS), days sales outstanding (DSO) and days purchases outstanding (DPO). No doubt, all very valuable indicators of working capital efficiency. But as such, that is all they are, indicators describing the high level WCM efficiency. They can be used for following up on the development of working capital efficiency through P&L and balance sheet. Still, simply not intended to help you take control of your working capital.
What taking control of your working capital is truly about is taking the detailed data from your processes, inventories and invoices and pulling out information on which you can make fact based decisions impacting the high level KPIs. These KPIs need to be cracked open and formalized into many smaller Operational Performance Indicators (OPIs) which can be understood where the actual processes take place.
The means to crack open those KPIs are in Business Intelligence (BI).
Making it happen has requirements – mainly on the data:
Do we map the correct processes to get the data? Is the data on transactions available on right level of granularity? Is the data reliable?
Data management is crucial in all of this, but down the road it all comes to the ways of Business Intelligence to crunch the numbers and serve that data as information to support fact based decision making. Decision without data is a guess.
Transaction and operational data refined in a BI tool gives you insight into root causes and outliers in the data. For example, customers with shortest payment terms, percent of purchases made under contract or outside the normal pricing policy, delays in processes from order to cash or in getting your customers invoiced of your work. Different visualizations give you a quick understanding of the situation without laborious deep dives into huge amount of data, or even better, offering the possibility to make those deep dives from the visualizations themselves.
Modern BI tools also aim to be more and more self-service, so that you do not have to have a legion of IT employees or controllers to take care of any multidimensional analysis by creating separate views into the data. Analysis on the go is the way of things.
With sophisticated but simple BI tools such as Qlik Sense, MS Power BI or Tableau, you can quite easily take your data and build very informative views for your operative people to analyze and utilize.
No matter what technology or the size of the company, without proper analysis, actions and follow up, the high level KPIs will not budge, unless taking control of your valuable data and transforming it into invaluable actions.
Capacent has been utilizing Business Intelligence tools both internally and at the client companies to analyze transaction and operational data and formalizing the crucial information from the data into versatile yet simple tools.