How analytics gives businesses a new edge
This new standard has cast into sharp relief just how inadequate old capital management tools have become. The primary solutions for many companies – even industry titans in the Fortune 20 – were one-size-fits-all programs such as Excel, but their limitations were quickly exposed.
"A lot of huge companies are still doing a lot of their cash forecasting in Excel, but suddenly you came into a time like this and went from periodic forecasting to daily or subdaily forecasting," Stein noted. "A lot of them stepped back and said, 'Look, we can't do this with people manually typing in Excel anymore. We need a cash forecasting tool.'"
These predictive analytics tools take into account several factors both inside and outside organizations to determine how much inventory to order as well as how much cash to have on hand at any moment. Business moves quickly during the pandemic, and capital management tools need to be equally speedy, said Stein.
"Analytics and segmentation have come to the front," she noted. “Imagine distribution between restaurants, small businesses, and bars. We know that as COVID-19 case rates go up, mobility goes down, unemployment goes up… and receivables are going to be challenged. Taking all of that external data, marrying it with data that we know about customer bases and modeling propensity to pay is allowing us to forecast where we'll fall short on collections so we can microtarget the timing and interventions."
Developing these analytical models and algorithms is a tall order for even the largest businesses, so many are partnering with third parties to aid in this endeavor. Genpact partnered with business spend management developer Coupa to aid in its analytics implementation strategy.
"As a company, you want to negotiate with the right set of strategic suppliers and get the right contracts and terms on those contracts because you have scale in negotiating them across the company as opposed to each individual buyer," Stein explained. "Partnerships are crucial to implementing platforms that facilitate the implementation of those strategies, and [this can guide] the buyer and the company to the right provider within the right parameters that have been agreed upon."
The pandemic has been a trying time for the business world, but companies are not alone in the challenges they face. Capital management, as with many other areas facing business struggles, relies on teamwork and partnerships to succeed in this uncharted world.
This article was originally published on PYMNTS.com.