Free Up Cash in a Small Business with Technology: From Invoicing Software to Inventory Management Software

Free Up Cash in a Small Business using Technology

How to free up cash in your small business? If you own a small business, you have to juggle all sorts of things to properly manage your company’s cash flow. You may feel particularly strained if your company makes a profit, but you still don’t have enough cash freed up to pay your dues on time. Fortunately, you can develop an effective system of software and technology including inventory management software to help you work cash flow in your company’s favor.

If you want to free up cash and before you invest in any software, you should get to know your cash conversion cycle pretty well. The cash conversion cycle measures the duration it takes for your company to turn money spent on inventory, production, and sales efforts into actual cash. The cycle comes to an end when you have collected money from customers and have used that money to pay for all your business related obligations. Calculating how many days your cash conversion cycle lasts is very beneficial. Doing so allows you to start coming up with ways to speed up the cycle and get more cash flowing into your company quicker.

Free up Cash with your Receivables Management

Once you have calculated your company’s cash conversion cycle, you are ready to start evaluating your accounts receivable practices. You need to get your customers to pay you on time, before it’s time to pay your own bills. In essence, you need to reduce the collection cycle. You can do this with some high quality invoicing software. Software of this kind provides you with detailed information about which of your customers are not paying you on time. You just have to enter in information about your customers’ accounts each time one is opened. This software allows you to know which customers to contact about late payments. If a customer consistently pays you late, you’ll easily be able to identify that pattern. Then, you can direct your efforts to sending the customer email reminders about payment due dates or charging penalty fees for late payments to discourage such undesirable behavior in the future.

Pay some attention to your accounts payable practices too. This is another place to look to free up cash. It can be a disaster if you have to make payments before you’ve received a good chunk of your monthly payments from clients. It’s best to find some suppliers that will give you payment plans that are flexible. Always, always, always pay your bills on time, though. If you want your company to grow in the future, you’re going to need good credit. As a business owner, it is integral for you to focus on protecting your company’s credit rating.

If you want to pay your bills efficiently, it’s a pretty good idea to set up an electric funds transfer system with your bank. This system allows you to pay suppliers on due dates, rather than quite a few days before due dates. Technology has made electronic funds transfers easier. You simply need to log on to your online or mobile banking account, and you’re a few clicks away from making an easy, fast payment.

Free up Cash in your Inventory

You also need to free up the cash that is tied up in your inventory as much as possible. Essentially, you need to reduce your inventory. Many business owners find inventory management software useful because it helps them keep track of their total inventory costs throughout the year. This allows them to always know how much inventory they have at any given time and how much time particular inventory sits in stock. When they use the software, they simply need to enter in information about what they are ordering from suppliers, how much it costs, and what they have in stock.

This software can actually save business owners money because it allows them to have better timing when it comes to ordering things, so the company never spends extra money ordering unnecessary inventory. Additionally, the software helps business owners figure out what they are selling the most of and what is not making a profit. This knowledge can help owners figure out what products may be eating up money unnecessarily because they are kept in stock for too long. Once those slow-moving, unpopular products are identified, the company can choose to stop carrying them or carry less of them.

Business owners always have to direct their attention to the management of cash flow. To manage your company’s cash flow, figure out ways to see more cash flowing into your company faster. Create accounts receivable and accounts payable practices that work for you. And try out some inventory management software and other technological tools to make your life as a business owner easier. Managing your cash flow properly will guarantee that you have enough money to pay your bills on time, and that’s definitely a good thing!

Best Practices in ERP Software Applications: Accounting, Supply Chain Planning, Procurement, Inventory

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The purpose of Best Practices in ERP Software Applications is to disseminate knowledge about the state-of-the-art in ERP (Enterprise Resource Planning) systems and the business best practices embedded in the systems.It is written for business professionals, project managers, consultants, team leaders, programmers, technicians, vendors, service providers, executives, teachers and students who are working, managing or studying in the field of software application deve… More >>

Best Practices in ERP Software Applications: Accounting, Supply Chain Planning, Procurement, Inventory

When to use ERP Software Consultants

Many times companies try to select and implement ERP software on their own. Sometimes this works and sometimes it doesn’t. So the question is, when should a company use an ERP Software Consultant to guide them in their ERP Selection or ERP Implementation?

The answer is not so simple. If a company is mature and has the resources that can look independently at the business processes, then it may make sense to embark on a selection on their own. Most of the time in mid-market sized or even smaller clients, then it is difficult for them to 1. Spare the resources and 2. Look at the business processes objectively.

Any good ERP Selection begins with a company evaluating their business processes. Borrowing from the Toyota Production system (aka Lean Manufacturing), a company should first eliminate waste and then consider automating. Automating bad processes will only make things worse faster. However, automating good processes will help grow the business and promote better communication.

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ERP Software Consultants – Best Practices

The real question becomes how much is the company willing to flex their processes to adapt to “best practices” that are usually built into a commercial software system. If the company is flexible (and this takes a lot of leadership to make happen), they can select a system and model their business around that system. The larger commercial systems, such as those from Microsoft, Infor, SAP, Oracle, and others have all grown up from thousands of implementations from all sorts of companies. They have developed efficiencies that many companies who adopt the software’s methodology can benefit from.

The real key is understanding the fit of a software package to the business. If the company does some niche processing, then a mainstream commercial package may not fit. However it the company is a distributor or a manufacturer of discrete products as an example, then a standard mid-market product would likely work for them.

So how do you choose the software, it is back to the business processes and the key requirements. “Key Requirements,” not just all requirements. The things that the old system does not do well and those things that it does very well are good places to start. Additionally, discover those requirements or processes that set your company apart from others in your industry. Usually processes around your competitive advantage are part of the key requirements.

Going back to the original question, should you use independent ERP Software Consultants? If you have a clear and objective understanding, you can afford the time to really research the vendors and you have a strong will with salespeople, then going it on your own might be reasonable.

If you do not have the time, the understanding of the ERP Software market, or the will power to manage at an arm’s length the software vendor’s salespeople, then an ERP Software Consultant would be a wise choice.

ERP Software Consultants

ERP Benefits

In any discussion on implementing an ERP system, the question “What are the benefits of an ERP System?” appears early in most selection cycles. We have had to look up these benefits on more than one occasion, so we thought we would document them here for you.

A good reference on calculating the benefits and ROI for an ERP solution is the book: Show Me the Money: How to Determine ROI in People, Projects, and Programs

Benefits

Real time information throughout all entire company
Better visibility into the performance of operational areas
Data standardization and accuracy across the enterprise. Single version of “The Truth!”
Best-practices or proven methodologies are included in the applications
Creates organizational efficiencies.
Allows for analysis and reporting for long-term planning

Significant Features on an ERP System

Information entered once into system
Can allow for the use of the best practices
Can be further developed
Based on reliable file structure
Provides functionality to interact with other elements in the process
Provides report writers and other tools for data inquiries

ROI and Cost Savings
Here are some areas to look for possible ROI:

Reduce Inventory through better visibility and efficiency
Savings through the reduction in duplicated efforts
More efficient operations allowing for increase in ability to process transactions (added capacity)
Reduction in non-value added activities (lean processing)
Higher utilization of employees (less transactional, more analytical)
Improvement in decision making through more accurate and real-time data

We have more benefits listed on our ERP Benefits Page.

Best Practices in ERP Software Selection

This is a great post that gets right to the point about ERP Selections:

Best Practices in ERP Software Selection
Posted 8/2/2006 by Eric Kimberling (ERP Consultant)

ERP vendor selection can be a daunting task, and one that is often not given the appropriate attention. CIOs or other executives in charge of making such major decisions often make decisions based on perception, gut feel, or faulty information. For example, executives often choose ERP software vendors based on what competitors or other large companies have chosen. However, information such as this does not necessarily reflect what is appropriate or inappropriate for your specific company. Further, planning for a successful implementation involves more than choosing the right software; it also involves preparation to ensure that ERP enables measurable improvements to your business.
In choosing an ERP or IT software package and planning for the overall project, executives need to make decisions based on objective and unbiased information rather than gut feel. In particular, organizations should consider the following:
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