How to Improve Your Cash Flow with an ERP System?

April 11, 2022

Healthy cash flow is crucial to the success of any business. Cash flow problems can quickly lead to financial instability and even bankruptcy. So how can you improve your company’s accounts receivable cash flow? ERP accounts receivable module can streamline you’re A/R process, which will improve your cash flow metrics.

What Is an Enterprise Resource Planning System?

An ERP system is a comprehensive business management solution that integrates all core business processes into a single software application. An ERP accounts receivable module enables businesses to manage accounts receivable and cash flow more effectively. The module can help you improve your invoicing process, track customer payments, and identify late payments.

How Does ERP Automation Help With Cash Flow Improvement?

ERP automation can improve your cash flow in several ways. Identify the ones that matter most to you and prioritize them when choosing software:

Automated Work Processes

Automated work processes can help your staff manage its workload more effectively. It eliminates tedious and time-consuming tasks from their job functions, so they can tackle more challenging and fulfilling work that requires human intellect.

Better Customer Service

An efficient accounts receivable process can provide better customer service. Quick and accurate responses to customer inquiries can keep them happy and maintain good relationships. Customers will also love the independent invoice management feature.

Faster Invoice Process

With accurate and up-to-date information in the ERP system, you can create invoices quickly and easily. This helps you get invoices out the door faster, improving your accounts receivable turnaround time.

Real-Time Data Analytics

ERP systems can generate reports updated in real-time. Managers can use this information to make timely decisions. It can also become a tool for transparency, so the AR team and other workers can track company performance.

Reduced Errors

Automated ERP systems reduce the number of errors made in the accounts receivable process. Reduced errors can lead to fewer invoice disputes and faster payments. It also reduces the risk of cash flow deficits and missed opportunities.

Track Customer Payments

You’ll immediately know when a customer makes a payment, and you can track payments over time to identify trends. With this information, you can make better decisions about pricing, discounts, and credit terms.

What Are Some Important Cash Flow Metrics?

There is no shortage of accounting KPIs. However, using too many can become overwhelming. Narrow your options from these top picks:

Accounts Receivable to Sales Ratio

This measurement identifies the percentage of sales that are accounts receivable. The lower the number, the better. It indicates that a smaller portion of sales is tied up in accounts receivable, freeing up more cash for the company.

Cash Conversion Cycle

This metric calculates the number of days a company takes to go from cash in to cash out. The cash conversion cycle includes the days it takes to sell products, the days it takes to collect receivables, and the days it takes to pay suppliers. The shorter the cycle, the better.

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Days Sales Outstanding

DSO measures the average number of days it takes to collect payments on accounts receivable. The fewer the number of days, the better the collection performance of your AR team. It also indicates a lower likelihood of cash flow problems.

Inventory Turnover Ratio

This metric measures how many times a company’s inventory is sold and replaced over a specific period. The higher the number, the better the company’s liquidity position. It also means the company is generating more cash from its inventory.

What Can You Do To Get the Most of an ERP System?

Optimize your ERP system for cash flow automation to leverage all its best advantages. Here are a few tips:

Customize the ERP system to fit your specific needs. Don’t be afraid to ask for help from the software vendor or an ERP consultant.
Review your accounts receivable process and identify areas where you can improve efficiency. Do this regularly, such as every quarter.
Train your staff on how to use the ERP system accounts receivable module. They should be familiar with its features to take full advantage of its capabilities.
Use the reports and dashboards available in the ERP system to understand your accounts receivable data better.

Why Is Cash Flow Management Crucial To Business Success?

Businesses need cash flow to pay bills, make investments, and cover other expenses. When cash flow is low or nonexistent, the company will struggle to survive.

This is why businesses must understand their cash flow and take steps to improve it. An ERP system automates accounts receivable processes and provides real-time data analytics. Businesses can improve cash flow and ensure success with these and other tools in place.

Why Should You Choose Gaviti’s Accounts Receivable Module?

We have spent several years perfecting our software to provide the best possible solutions for our clients. Companies using our A/R software now report a 30% improvement in their DSO and a substantial boost in cash flow. The workers at these companies also report higher job satisfaction due to removing monotonous tasks.

Would you like to partner with us and leverage our A/R software as a module for your ERP system?

We look forward to working with you. Let’s partner!