Using ERP to boost business cash flowYema Akbar | 06 June 2022
No matter what industry you operate in, having robust cash flow management is an integral part of running a business. From medium-sized enterprises to multinationals, cash flow can be the difference between soaring ahead of your competitors or simply staying afloat.
Having the right ERP platform in place opens a world of possibilities that can help you get the fundamentals right.
Mastering cash flow management
When handled well, effective cash flow management gives you complete oversight of your costs versus revenue while also helping you make more informed financial decisions. Leveraging an ERP system means complete organisational cash flow can be consolidated across bank transactions, cash transactions, sales invoice receipts, standalone payments and payments due for allotment. As you’re able to track the real-time balance sheet of the company, you can ensure your obligations are being met while optimising your liquidity position.
But improving your cash flow management isn’t always easy, and it often takes time for any changes to have a noticeable impact on your bottom line. To support you as you rework your cash flow management strategy, here’s four different goals that can be achieved with a strong ERP system suited to your business.
#1: I want to increase my monthly cash flow
There are a few easy ways to increase your monthly cash flow, but they are all rooted in business best practice. The simplest solution is to expedite your invoices – send them out as soon as possible. The sooner your clients receive them, the sooner they can be paid.
By the same token, keep on top of sluggish billpayers. Invoice reminders are a helpful way to nudge clients who haven’t paid within the agreed terms. Sending both invoices and reminders can be automated with the right technology. Don’t rely on manual, time-consuming invoicing – instead, use cloud-based software to better manage your cash flow needs.
Don’t forget to consider late purchase order reporting means you have knowledge of when orders might not be leaving your warehouse because of partial payments. Maintaining insight into late purchase order reports means you can stay on top of things from a cash flow and service perspective.
In a similar vein, planning reports help you move your business’s capital tied up in inventory, giving you real time knowledge of where and when to restock – to optimise sales while avoiding needless stock surplus.
Ultimately, consider putting together a flow diagram which effectively maps out the various inflows that can be maximised and considered strategically in line with your cash flow strategy.
#2: I want to improve my operating cash flow
How long has it been since you updated your payroll processes? One of the most common mistakes businesses make is paying employees on a fortnightly basis. By switching over to a bi-monthly schedule (two set days every month), you avoid the risk of having three fortnightly pay cycles in a month, which generally happens twice a year.
It’s also worth reviewing how you pay your vendors. Unless you are getting a discount for early payment, there’s no reason to pay your bills straight away. Deferring payments while still staying within the payment terms is a helpful way to slow your business’s outflow of cash.
Automated workflows help you streamline all those time-consuming processes you do manually. And further, setting these up within a cash flow projection model is critical to achieving this goal. With strategic visibility to regularly track the financial well-being of your business at a range of dates, you can look well into the future based on all the financial data that is currently available.
#3: I want my sales and marketing teams to help boost cash flow
Do you have clients who regularly purchase the same product or service from you? It’s wise to consider setting them up on a subscription sales cycle. Think of it like a ‘retainer’, where you always know you will have a set amount of cash coming in every month.
You can also leverage your happy customers. These are brand ambassadors who love your business offering and can potentially bring in new clients. By setting them up with a referral program, your existing clients can earn rewards (such as a discount on future purchases) whenever they bring you new business.
With numerous departments and stakeholders across the business, automating reports across various programs would be key to producing timely, and accurate data to support managers in their decision making across the board.
#4: I want to better manage my cash flow during a crisis
Whether it’s something minor like a seasonal dip in sales, or a much larger crisis like pandemic related shipping delays, steadying your cash flow is essential to staying afloat. One strategy that experienced businesses implement is to take on more debt today with the expectation that business will return to normal within a few weeks or months. You will need to measure the risks against the benefits, though drawing down on your line of credit may help during short-term troubles.
A crisis is also the time to examine any unnecessary expenses you may have accrued. Can you replace any of your existing services with cheaper alternatives? Are there any non-essential contractors you can cut loose without having to make your employees redundant? Even something as small as cutting down on perks like monthly company lunches can help steady your cash flow.
Your ERP system can effectively cover a wide range of information to ensure you can minimise risks through greater visibility, while also acting pre-emptively where required to improve your cash flow position.
Every business can struggle with cash flow management, particularly if they don’t have the knowledge or support to implement the right strategy. Through our ERP implementation process, Wild Tech can match you with the best cash flow management solutions to support the growth and strategic trajectory of your business.