Artificial Intelligence (AI) in working capital management: Practices and future potential

Abstract

This study delves into how artificial intelligence (AI) transforms working capital management by addressing the limitations of traditional methods. The focus is to critically review research publications, case studies and industry reports using qualitative research methodology to examine how AI improves operational efficiency and decision-making in this area. The study demonstrates the practical application of advanced machine learning algorithms and big data analytics in optimizing inventory management, enhancing demand forecasting and improving cash flow predictions. A thorough review of recent research and case studies reveals additional benefits, including automated reconciliations, debtor risk analysis, accelerated cash inflows, invoice processing and proactive working capital management. Despite challenges in integrating AI with legacy systems, the potential for substantial improvements in financial health and operational efficiency is significant. The study also suggests future research directions, such as developing comprehensive AI-driven applications for broader working capital considerations, creating empirical validation frameworks for model performance and addressing ethical considerations to fully harness AI's potential in optimizing working capital management.