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Optimising cash flow using Business Intelligence

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Ensuring timeous payments and cash flow management are essential in the running of small and growing businesses.

The stark reality is that start-up capital is rarely sufficient to fund the daily running costs of your business for the long term. You need to create an accurate forecast of cash coming in and going out to ensure that you make informed decisions, and don’t place your business at risk by overspending.

Using Business Intelligence (BI) can help you navigate your way to better financial decisions, timeous payments, and a healthy cash flow. Some of the key BI guidelines are:

Knowing who owes you what

It can be difficult to keep tabs on who owes you, and how much, but failing to chase unpaid invoices is the quickest way to get your business into financial trouble.

A study conducted by Sage showed that 52% of SMEs experience direct negative impacts from late payments:

  • 28% struggle to pay bonuses around the festive period,
  • 34% pay suppliers late, and
  • 28% delay investments into their businesses.

Implementing BI solutions will give you instant access to debtor details – who owes you, how much, and how long payment has been overdue – which could save you up to 15 days annually in chasing late payments.

Knowing when cash is due

The power of Business Intelligence in the chasing of payments lies in its ability to give a simple visual representation of due and overdue invoices, equipping business owners with the insights they need to approach customers for payment.

Late payments are often the death knell of small businesses. If you note that certain customers are frequent offenders, attempt to reach an agreement with them by supplying concrete evidence and suggested terms.

Knowing how much you owe

Paying creditors on time is as important as receiving timeous payment in the running of a successful business.

Business Intelligence offers insight into who you owe money to, and how much you owe. This information is critical for future planning to ensure that anticipated expenses do not outweigh projected income.

The ability to quickly and easily identify exactly how much you owe, to whom, empowers you with the knowledge to make smarter business decisions, like knowing who to pay when.

Knowing when you need to pay

Knowing exactly when you need to pay your creditors will help with cash flow management. Often businesses lose track of who they owe money to and when payment is due. The result is that they make hasty payments at the wrong times to avoid arrear penalties – like paying for stock at the end of the month, when payment was only due at the end of the following month. This puts unnecessary strain on cash flow.

Having BI insights into when you have to make payments can also empower you to further improve your financial situation, like renegotiating terms if required.

Renegotiating credit terms

Sometimes even the best business practices will leave you with strained cash flow.

The accurate insights that good Business Intelligence provides, will arm you with the information you need to contact your creditors to renegotiate terms. Many creditors are open to these negotiations based on the premise that getting paid regularly is better than not getting paid at all.

Terms that allow for payment over a longer period help free up cash flow, which could see your business through a rough patch.

By staying ahead of the curve using Business Intelligence to track your cash inputs and outputs, you give your business a greater chance at success because you have accurate information on hand. You’ll know exactly how much money you have and how much of it you can spend, which reduces your risk and helps to avoid any nasty surprises.