An ERP system enables small to mid-size distributors to transform their business. Increased visibility is among the many benefits, which is critical when you’re looking for ways to increase cash flow. After all, increasing sales isn’t the only way to increase the assets you have available to you. There are many other opportunities to free up cash in your business. Whether you’re monitoring accounts payable or reducing days sales outstanding, your ERP system is at the center of your efforts. Here are a few other ways that you can leverage your ERP system to improve cash flow.
1. Improve supplier terms
When you know more about the costs of working with various suppliers, the terms of your purchasing agreements, surcharges and minimums, you’ll be in a better position to negotiate. Whether you opt to work with a supplier who offers better terms, or request a better arrangement with current suppliers, having all the right data available at your fingertips allows you to identify ways to cut costs. The integrated CRM (Customer Relationship Management) tools and other vendor information in your ERP system will help you strengthen your supplier relationships.
2. Reduce excess inventory costs
When you store product prior to shipping, it increases your overhead. You may be able to avoid some of this by changing the date you receive product from suppliers. But managing that manually can be cumbersome. A good ERP system will have inventory control and forecasting features to automatically monitor stock levels and movement, so you’ll have the inventory you need, when you need it. And you can reduce the amount of money you have tied up in obsolete or excess stock with optimized reorder quantities.
3. Minimize backorders and expedited order costs
Every time you get an order for an item that’s not in stock, you have to make a choice. You can either wait for your next scheduled order to arrive and risk your customer buying from a competitor in the meantime. Or you can put in an emergency order and pay extra to get the product right away. Companies that use advanced inventory planning tools often see a 12–22% reduction in backorders. You’ll have fewer expedited order fees, which will keep your margins in check and improve your cash flow.
Pursuing opportunities to save allows you to take control of your financial management. This is particularly true when you can predict the impact of your options and avoid making decisions that will harm your business. An ERP solution gives you the ability to monitor your company’s spending habits across the board. You can easily identify areas of improvement, streamline processes across your company and see the impact in your cash flow.
As one of the top Canadian ERP partners, we've helped many other distributors streamline operations and fuel growth. We're here to guide you through the process – right from evaluation, through implementation and beyond.