Having a good cloud ERP solution in your company can also help you improve cash flow. Here are three ways in which the power of an ERP system can be put to work for your business to improve cash flow over time.
Results of Poor Cash Flow Management
- Inability to pay vendors on time because there’s not enough cash on hand
- Delayed or missed payments to employees, which cause high turnover and unhappy workers
- Inability to purchase stock for resale, thus continuing the cycle of poor cash management (you can’t earn revenue if you have no stock to sell)
- Lost contracts because of an inability to fulfill contract terms
That’s just scratching the surface. Businesses who do not get a handle on their cash flow can face bankruptcy, failure, or sluggish growth. Those who do manage their cash flow adequately have a fighting chance against competitors and marketplace forces that challenge even the best-managed businesses.
Improvements in Cash Flow Due to Cloud ERP
What causes cash flow issues? Many things contribute to poorly managed cash flow. Lack of information can lead to bad decisions on how to spend cash on hand, which can result in poor cash flow management. Overdue receivables, unpaid invoices, and bad budgeting practices can all lead to cash flow troubles.
Cloud ERP systems provide a robust accounting and financial management system for companies. Cloud software runs over the internet, so that changes made to the system in one part of the company are reflected throughout the system almost instantaneously. If connected to a company’s warehouse management system, for example, the second that stock runs low, the system can alert managers to reorder products. Managers can view data immediately and make better decisions based on accurate information.
The three big ways that cloud ERP improves cash flow management, however, are as follows.
- Manage Overdue Receivables and Invoices
Many cash flow challenges result from outstanding receivables and unpaid invoices. Failure to follow up on overdue invoices with customers who have outstanding balances can lead to cashflow shortages. On the flip side, failing to pay invoices by the due data can also lead to improper cash flow reports by overstating the availability of cash on hand.
The problem is exacerbated when companies fail to reconcile bank statements and credit card charges monthly. As time goes by, both sides of the cash flow equation, money in and money out, can become seriously unbalanced and inaccurate. And the longer such a problem goes on, the less likely it is that someone will find and fix it. Businesses that get into this situation often neglect other aspects of their accounting, too, exacerbating the problem.
With an ERP system, you can set reminders for many tasks, including paying invoices and following up on receivables. You can also automate processes, including sending past-due notices to customers who haven’t paid yet. Reconciling statements and charge accounts is easier, with simple one-step entry and even scanned receipts possible.
- Automate Reports
Cloud ERP systems can produce timely, accurate reports. But did you know you can automate many common reports, so they are run on a certain date and routed to the appropriate managers? It is a great time saver as well as a help to improve cash flow management. You cannot manage what you don’t see, and automated reports ensure visibility and transparency into every aspect of cash flow management. Managers can see if any of their vendors have not been paid yet, ensure customers understand when invoices are coming due, and make any changes deemed necessary to better manage corporate cash flow.
- Fix Shipping Delays
Reports from an ERP system cover a wide range of information. For example, if the warehouse is connected to the cloud ERP system, it can receive data on shipments and delays. The faster items ship to customers, the faster companies can bill for them. Any shipping delays from your company equal delayed payments as well as unhappy customers. Unhappy customers are less likely to make repeat purchases. Identifying and managing shipping delays can go a long way toward faster billing and payment receipt, thus improving cash flow.
Cloud ERP Systems for Consideration
The right ERP system offers extensive benefits beyond cash flow management. Explore your options for a new or upgraded cloud ERP system with Mindover Software. We invite you to learn more about