For senior finance leaders, working capital is more than a number on a balance sheet. It’s a real-world measure of how smoothly the business runs, how much cash is available, and how healthy a business is financially.
When receivables are delayed, inventory is mismanaged, or payables are poorly timed, cash gets trapped inside the business. That can tie up millions that could otherwise be used to invest strategically, fund growth, hire, expand into new markets, or simply operate with confidence during uncertainty.
A finance leader who improves working capital creates a genuine competitive advantage. It makes cash flow more predictable and reduces the need to borrow money, which is especially important when borrowing is expensive and scrutiny on cash discipline is high.
But achieving this requires more than spreadsheets and manual reconciliations. AI Agents offer a practical solution by automating routine processes, spotting bottlenecks, and supporting better decisions, while humans remain in control of cash, risk, and customer relationships. Deloitte’s finance insights highlight this shift towards automation-led finance transformation.
What is working capital, and how does it impact cash flow?
Working capital is the difference between what a company owns in the short term (cash, money owed by customers, inventory) and what it owes in the short term (supplier bills and other expenses).
In simple terms, it represents the cash available to keep the business running day to day.
This is why working capital matters beyond finance. Even non-finance leaders feel the impact when:
Sales teams are chasing renewals, but customers are stuck in invoice disputes
The business delays investment decisions because cash is uncertain
AR teams spend time chasing invoices instead of high-impact work.
Effective working capital management ensures cash is not unnecessarily tied up, reduces the cost of borrowing, and improves flexibility for strategic decisions.
Core metrics used by CFOs to monitor working capital include:
Days Sales Outstanding (DSO)
The average number of days it takes for customers to pay their invoices
Days Inventory Outstanding (DIO)
The average time products sit in storage before being sold
Days Payable Outstanding (DPO)
The average time the company takes to pay its suppliers
Cash Conversion Cycle (CCC)
The total number of days it takes to turn spending on operations into actual cash received
Key working capital metrics and what improves them
These metrics describe how cash moves through a business. They are connected, meaning improvements in one area (such as collecting payments faster) often create knock-on benefits in forecasting, liquidity planning, and investment decisions.
Metric | What it tells you | What typically improves it |
|---|
DSO (Days Sales Outstanding) | How quickly customers pay you | Faster dispute resolution, structured follow-ups, better prioritisation of high-risk accounts |
DIO (Days Inventory Outstanding) | How long products sit before being sold | More accurate demand forecasting, better stock planning, reduction of slow-moving items |
DPO (Days Payable Outstanding) | How long you take to pay suppliers | Clear visibility of cash, planned payment runs, optimised use of agreed payment terms |
CCC (Cash Conversion Cycle) | How long it takes to turn business activity into cash | Improvements across receivables, inventory, and payables working together |
What causes poor working capital performance?
Even well-run organisations face obstacles that slow down cash flow and trap working capital.
These challenges are rarely just a “finance problem”. They usually come from day-to-day friction across billing, sales, customer service, and procurement, which is why working capital is difficult to improve through manual effort alone.
Delayed receivables
Manual invoice processing, slow follow-ups, and lack of prioritisation increase DSO and delay cash coming in.
Common examples include:
The invoice was sent to the wrong person and never reached the approver
The customer won’t pay until a purchase order (PO) number is added
The invoice is correct, but the supporting documents are missing
A billing query is raised, but no one responds for 10 days
The customer’s internal approver is on leave, so payment stalls
When these issues aren’t resolved quickly, finance teams become reactive: chasing payments, responding to escalations, and manually updating systems instead of preventing delays in the first place.
Excess or mismanaged inventory
Without reliable forecasting, companies may overstock or understock, increasing DIO and operational risk.
Overstocking ties up cash in products that aren’t selling. Understocking leads to missed sales, urgent purchases, and higher costs that reduce margins.
In both cases, inventory becomes a drag on working capital, and the effects show up in cash forecasts and liquidity planning.
Suboptimal payables management
Paying suppliers too early reduces available cash, while paying too late can damage supplier relationships and affect DPO.
Payables decisions are rarely simple, especially when organisations are balancing:
Supplier relationships
Contract terms and penalties
Early payment discounts
Projected cash positions
Competing internal priorities
Without clear visibility and reliable forecasts, businesses often default to paying early “to be safe” or paying late when cash is tight - neither approach is ideal.
Limited visibility and fragmented data
Disconnected systems and spreadsheets prevent real-time monitoring, forcing reactive decisions.
Many organisations already have the data they need, but it is scattered across:
ERP systems
Billing tools
CRM platforms
Email inboxes
Spreadsheets
Shared drives and ticketing systems
Teams spend time gathering information instead of using it to improve outcomes.
High-volume of administrative tasks
Finance teams often spend excessive time reconciling invoices, sending reminders, and chasing approvals, leaving little time for strategic work.
Even when leadership wants stronger cash discipline, the finance team may already be at full capacity, and manual processes do not scale as volumes increase.
External pressures
Market volatility, rising borrowing costs, and longer supply chain cycles make working capital challenges worse.
When borrowing is expensive, the pressure to unlock cash internally increases. Working capital becomes not just an operational measure, but a strategic lever.
Customer engagement gaps
One-way, templated collection emails are often ignored, slowing payment recovery and increasing write-offs.
All of these issues tie up cash, increase risk, and reduce financial flexibility, making it harder for finance leaders to achieve strategic goals.
How AI agents improve working capital performance
AI Agents improve working capital management by automating routine tasks, offering predictive insights, and supporting proactive decisions.
They do not simply make existing processes faster, they help teams prevent problems before they occur, prioritise more intelligently, and ensure consistent follow-through.
Accounts receivable automation and DSO reduction
AI Agents can automate replies to invoice queries, send personalised payment reminders, manage replies and follow-ups; accounts receivable tasks that often slow down payment and increase DSO.
Unlike traditional one-way reminders, they can manage two-way conversations, respond to customer questions in real time, and escalate overdue payments when needed.
Examples include:
Recognising that a customer is requesting a credit note rather than disputing the invoice
Identifying a missing PO number and requesting it immediately
Confirming the correct billing contact when emails bounce
Automatically following up when a customer promises to pay on a specific date
Inventory forecasting and DIO optimisation
AI-driven forecasting tools analyse historical data, market trends, and seasonality to identify slow-moving or obsolete stock.
This helps reduce DIO while ensuring there is enough inventory to support operations and better cross-functional planning.
Payables optimisation and DPO management
AI Agents can analyse supplier terms, early payment discounts, and projected cash positions to recommend when to pay suppliers in a way that preserves liquidity without damaging relationships.
Cash flow forecasting and working capital visibility
Real-time dashboards provide finance leaders with a clear view of incoming and outgoing cash, highlighting bottlenecks before they create liquidity issues.
Practical steps finance leaders should take when implementing AI agents for working capital
Finance leaders can follow a structured and practical roadmap to introduce AI agents into working capital processes. The key is to focus on measurable impact, build confidence internally, and scale responsibly.
1. Identify high-impact use cases first
Start with areas where cash impact is visible and measurable, typically accounts receivable (DSO reduction) or inventory optimisation.
Look for:
High invoice volume
Frequent disputes
Long approval chains
Manual follow-ups
Repeated bottlenecks
2. Quantify the business case clearly
Before implementation, define the financial opportunity in concrete terms. For example:
A 5-day reduction in DSO equals £X million in freed-up cash
A 3% reduction in write-offs equals £X improvement in margin
A reduction in manual workload saves X hours per month
3. Ensure strong data foundations
AI effectiveness depends on structured, clean, and accessible data. Finance leaders should:
Standardise invoice formats and payment terms
Clean historical payment behaviour data
Consolidate customer contact information
Reduce spreadsheet dependency
4. Define success metrics and tracking mechanisms
Track both financial and operational KPIs, such as:
DSO, DIO, DPO, CCC
Dispute resolution time
Promise-to-pay adherence rate
Email response time
Write-off percentage
5. Combine agentic AI automation with human oversight
AI should manage scale and consistency, not replace judgement.
Humans should:
Handle sensitive customer relationships
Approve escalations
Manage large or strategic accounts
Make policy decisions
6. Establish governance and accountability
Define ownership early:
Who monitors AI performance?
Who approves rule changes?
Who handles escalations?
How are exceptions resolved?
7. Invest in change management
Technology alone does not transform working capital; people do. Finance leaders should:
Communicate why AI is being introduced
Address job security concerns directly
Train teams on new workflows
Demonstrate early wins
8. Start with a pilot programme
Test AI in a controlled environment before full rollout. This could include:
One geographic region
One customer segment
A subset of invoices
Specific payment terms
9. Build a Continuous Improvement Loop
AI systems improve over time. Finance leaders should:
Review KPI performance monthly
Analyse dispute trends
Adjust communication strategies
Refine prioritisation rules
How Paraglide helps B2B finance teams improve working capital with AI agents
Paraglide automates high-volume B2B accounts receivable processes, helping teams unlock cash and improve working capital efficiency.
Paraglide AI agents can:
Automate invoice processing, reminders, and reconciliations
Manage two-way customer conversations and respond to billing queries in real time
Track promised payment dates and missing PO numbers
Send personalised, targeted payment reminders
Reduce DSO and lower accounts receivable write-offs
Final thoughts
Improving working capital is central to a CFO’s responsibility for liquidity, efficiency, and growth. AI Agents transform traditional finance processes into proactive, automated, and intelligent workflows. By automating repetitive tasks, reducing late payments, optimising inventory, and managing supplier payments strategically, finance leaders can unlock cash, reduce risk, and strengthen financial resilience.
AI is no longer optional, it is becoming a strategic imperative for CFOs who want to maximise working capital efficiency.