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ERP systems have various built-in modules that substantially improve cash flow management.
When companies are founded, they use manual systems for maintaining their finance and accounts. But as the client base, number of daily transactions, and mandatory compliances grow, it becomes challenging to sustain those operations by using manual systems. Moreover, if the company loses a key employee, the troubles may further increase. Most businesses implement multiple databases to manage critical business functions, but they adversely impact your ability to:
a. Sell products efficiently to the customers
b. Produce accurate forecasts
c. Adhere to taxes and compliances
d. Gain working capital visibility
e. Manage inventory and billing processes
f. Manage cash flow
Enterprise Resource Planning (ERP) software enables businesses to improve and manage their cash flow — expenses, inventory, sales, and billing.
This article will focus on how ERP systems can help you streamline cash flow management.
1. ERP systems control inventory costs.
Improving cash flow requires keeping your inventory costs low. ERP systems break information silos and provide access to critical inventory data to all business stakeholders — frontline executives, C-suite managers, vendors, suppliers, and distributors. It means that employees working in different departments have to no longer ask for reports from the inventory department. Also, there is no need to work on long Excel sheets as the ERP system will automatically update everything. Moreover, the ERP system contains smart replenishment tools that monitor the inventory in real-time and place automatic orders for raw materials when their quantity goes below the set threshold.
Also Read: Tips to find the Right Accounting Software for your Business
2. ERP systems prepare automatic invoices.
Usually, there is a significant time gap between service delivery and billing if the invoices are manually managed. ERP systems help improve cash flow by allowing companies to raise an invoice while the service technician is at the client’s place. Thus, companies don’t have to wait for the next billing cycle — monthly, bi-monthly, or weekly — as they can generate invoices on-demand.
3. ERP systems reduce the need for additional labor.
One of the best ways to improve your cash flow is by reducing labor costs. ERP systems will automate most of your work processes, including raising invoices and sending reminders and alerts to your clients from time to time. ERP software lets you set predefined rules and thresholds, thereby eliminating the need to incur additional labor costs. Moreover, when your employees don’t have to waste time doing trivial jobs like data entry and filing forms, they can focus on strategic tasks that require creativity and intelligence.
4. ERP systems manage vendor operations conveniently.
Managing vendor processes is critical for ensuring business success. Suppose you manufacture smartphones and the price for silicon in the international market goes down. In that case, the ERP system will automatically purchase a significant quantity of silicon chips from the vendor to benefit from the low global prices.
5. ERP systems monitor current and future cash flow
Businesses must develop accurate forecasts that help manage current and future cash flows. ERP systems provide consolidated data that reveals the exact cash position making it easy to manage payments and receipts. They provide free access to information to all business stakeholders that monitor all the components of cash flow — customer credit limits, discounts, inventory costs, marketing and sales budgets, and payment terms.
Also Read: Why the sales forecast is an important metric to consider even before engaging your sales team in actual sales?
Conclusion
By improving your cash flow, you will gain a 360-degree perspective of your expenses, revenues, and investments. You will significantly improve your cash flow management by spending judiciously, saving a lot more money, and preparing accurate forecasts.
At Sage Software Solutions (P) Ltd., we are home to world-class ERP software and CRM software that will solidify your business tech support fundamentals and enable you to build a customer-centric organization. To know more about it, SMS SAGE to 56767. You can also write to us at sales@sagesoftware.co.in
Disclaimer: All the information, views, and opinions expressed in this blog are those of the authors and their respective web sources and in no way reflect the principles, views, or objectives of Sage Software Solutions (P) Ltd.
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