Turning Dynamics 365 Into a Working Capital Optimization Platform

TL;DR

Microsoft Dynamics 365 Finance gives organizations the data, forecasting capabilities, and financial workflows needed to identify working capital opportunities. But turning those opportunities into measurable liquidity may require an external funding and execution layer. By integrating Dynamics 365 approved invoice workflows with Supply Chain Finance, organizations can extend buyer repayment timing while suppliers receive payment according to the original invoice terms or choose optional early payment. The result is a more connected approach to working capital optimization that links ERP insight with funding execution and program visibility.

---

Finance leaders already have extensive visibility into many of the factors that influence working capital. Microsoft Dynamics 365 Finance brings together data from receivables, payables, inventory, and forecasted cash positions. Yet visibility alone does not improve liquidity.

This distinction is increasingly important as companies face prolonged payment cycles, supply chain uncertainty, and rising capital costs. Dynamics 365 can help finance teams identify where liquidity is constrained and model future cash requirements. The challenge is acting on those opportunities without disrupting operations or creating additional pressure on suppliers.

As a result, many organizations are extending the value of Dynamics 365 by using it as the foundation of a broader working capital optimization strategy that combines operational data, automation, and external funding.

This article explores how finance leaders can connect Dynamics 365 insights and approved invoice workflows with Supply Chain Finance to move from working capital visibility to funding execution.

The Scale of the Working Capital Opportunity

According to The Hackett Group’s 2025 U.S. Working Capital Survey, which analyzed the 1,000 largest publicly traded U.S. nonfinancial companies, approximately $1.7 trillion remained tied up in excess working capital. That amount was equivalent to 35% of gross working capital and 11% of aggregate revenue. The survey also found that accounts receivable represented the largest component of the opportunity, accounting for approximately $600 billion.

The findings highlight an important distinction for finance leaders: access to financial data does not automatically translate into working capital optimization. Many organizations already have the visibility needed to identify working capital opportunities. The challenge is translating those insights into measurable liquidity improvements.

Working Capital Optimization in Dynamics 365

Working capital optimization improves how efficiently cash moves through a business while maintaining operational performance. For organizations using Dynamics 365 Finance, the challenge is often not gaining visibility, but acting on the insights across accounts receivable, accounts payable, inventory, and forecasted cash requirements.

The cash conversion cycle (CCC) provides a useful starting point by showing how receivables, inventory, and supplier payment timing influence the number of days cash remains committed to operations. It brings together three core working capital metrics:

• Days Sales Outstanding (DSO)
• Days Inventory Outstanding (DIO)
• Days Payable Outstanding (DPO)

Dynamics 365 brings together much of the financial and operational data finance teams use to evaluate these metrics, forecast cash requirements, and identify potential working capital constraints. The next step is translating those insights into action through operational improvements, external funding, or a combination of both.

Extending Dynamics 365 with Supply Chain Finance

Within this broader working capital framework, approved supplier invoices represent a particularly actionable point for integrating external funding with Dynamics 365.

The opportunity is particularly relevant in working-capital-intensive industries such as manufacturing, distribution, retail, food and beverage, and industrial equipment, where supplier obligations and inventory commitments may precede customer receipts by a significant period.

Supply chain finance (SCF) introduces external funding into that timing gap, allowing organizations to improve liquidity without fundamentally changing existing procurement and accounts payable workflows. Instead of requiring suppliers to absorb longer payment terms, SCF can separate the buyer’s repayment timing from the supplier’s receipt of funds.

Leading specialty lenders typically automate the process through digital supply chain finance platforms that streamline program administration, supplier participation, funding activity, payments, and reporting. For example, eCapital delivers these funding options through FastTrack, its purpose-built supply chain finance solution.

This proprietary platform manages approved invoices, funding activity, payments, supplier participation, and program reporting. The platform supports two complementary strategies:

• FlexTerm for buyers: Buyers can extend repayment timing to eCapital on eligible invoices while suppliers receive payment according to the original invoice terms.
• Early Pay for suppliers: Eligible suppliers can choose to receive payment before the original invoice due date.

Together, these options allow organizations to address buyer liquidity, supplier liquidity, or both through one integrated program.

How Supply Chain Finance Integrates With Dynamics 365

The integration of ERP and funding systems centres on an established financial control: invoice approval. Once a supplier invoice has been approved through the buyer’s review workflow in Dynamics 365, the invoice data can be transmitted to the SCF platform and evaluated for funding eligibility. Eligibility is typically based on factors such as invoice status, buyer creditworthiness, and potential receivables dilution.

This approach allows organizations to add funding capabilities to their existing AP processes rather than replace them. Dynamics 365 remains the buyer’s ERP and system of record for supplier and invoice data, while the SCF platform manages supplier enrollment, financing activity, payments, and program reporting.

Because financing eligibility is tied to the buyer’s existing invoice approval process, organizations can connect approved invoice activity with Supply Chain Finance while maintaining established ERP controls and accounts payable workflows.

Four decisions that shape an integrated SCF program

1. Define the working capital objective
   Determine whether the priority is extending buyer repayment timing, increasing supplier access to liquidity, standardizing payment terms, or combining these objectives.
2. Identify the appropriate invoice and supplier population
   Evaluate supplier spend, invoice volume, existing payment terms, supplier criticality, and supplier eligibility and expected participation to determine where the program can create meaningful value.
3. Evaluate the funding structure
   Determine where FlexTerm, Early Pay, or a combination of both aligns with the organization’s liquidity requirements and supplier strategy.
4. Measure financial and operational outcomes together
   Monitor eligible invoice volume, buyer repayment extension, supplier enrollment, program utilization, payment activity, invoice status, and realized working capital impact.

How an integrated SCF workflow operates in practice

Once a Supply Chain Finance facility is implemented, Dynamics 365 and the SCF platform connect approved invoice activity with financing eligibility, payment options, transaction processing, and program monitoring.

Typical Workflow:

1. Supplier invoices are received, reviewed, and approved through the organization’s established Dynamics 365 accounts payable process.
2. Eligible approved invoice data is transmitted to the automated SCF platform.
3. Approved invoices become available for the applicable funding option. Suppliers can request early pay, while buyers can request extended payment terms.
4. The lender executes the applicable funding and supplier payment. Under an extended payment arrangement, the supplier receives payment according to the original invoice terms while the buyer receives additional time to repay the lender.
5. Payment and routing information supports transaction processing, reporting, and reconciliation.
6. Finance teams monitor supplier enrollment, invoice status, program utilization, payment activity, and working capital outcomes.

What to Look for Beyond the Technology Integration

Technical connectivity is only one component of a successful SCF program. Funding capacity, supplier onboarding, operational support, payment execution, and program visibility all affect whether an integration produces measurable working capital optimization results.

Finance leaders should therefore evaluate the operating and funding model behind the technology, not only the software connection.

Look for:

• Purpose-built SCF technology: Manage approved invoices, funding activity, payment elections, transaction status, and reporting.
• Direct funding: Capacity to provide the capital needed to support early pay for suppliers and extended payment terms for buyers within the same solution.
• Managed supplier enablement: Support supplier enrollment, bank verification, education, and ongoing adoption.
• Program visibility: Monitor supplier enrollment, utilization, payment activity, invoice status, and facility usage.

Conclusion

Dynamics 365 Finance provides the data, forecasting capabilities, and approved invoice workflows needed to identify working capital optimization opportunities. Integrated Supply Chain Finance adds external funding, supplier enablement, and program-management capabilities without replacing the organization’s ERP or established accounts payable processes.

By connecting approved invoice activity with funding execution, organizations can increase buyer repayment flexibility, provide optional supplier early payment, and improve visibility into program activity. The result is a more connected approach to working capital optimization that supports liquidity objectives while preserving established financial controls and supplier payment practices.

Contact us to learn how eCapital’s Supply Chain Finance solution integrates with Dynamics 365 to turn approved invoice workflows into measurable working capital improvements.

Key Takeaways

• Dynamics 365 Finance brings together financial and operational data that can help finance leaders evaluate working capital performance, forecast cash requirements, and identify potential liquidity constraints.
• Visibility is only the starting point. Some working capital opportunities require external funding and execution capabilities beyond the ERP’s role in financial management and decision support.
• Integrated Supply Chain Finance can connect approved invoice activity in Dynamics 365 with funding workflows. Automated funding options can extend buyer repayment timing while suppliers receive payment according to the original invoice terms, while the capacity to offer early pay can give eligible suppliers the option to receive payment sooner.
• The integration extends existing ERP and accounts payable workflows rather than replacing them, connecting ERP insight with external funding, supplier enablement, program visibility, and ongoing management.