10 steps to improve Cash Flow

Strong cash flow is the lifeline of a business.

The recent uncertain economic conditions, high inflation rate, and the tightening of the monetary policy by the Federal Reserve makes managing cash even more important in the next 12-18 months. Improving Working Capital performance can have a significant impact on cash flow for any business. Finance Leaders can take the following 10 steps to position their companies for success.

  1. Negotiate the most effective payment terms with customers based on their payment patterns. Make payment behavior analytics accessible to your sales teams.
  2. Build dashboards with real-time visibility into Account Receivables, Payables, and Cash positions by integrating your ERP or accounting system via APIs.
  3. Set goals on key performance indicators such as Days Sales Outstanding (DSO) and Days Payables Outstanding (DPO). Utilize peer-benchmarking for setting up competitive goals.
  4. Improve collections efficiency by investing in analytics to predict late payments, and an auto-escalation system. Most late paying customers pay on-time with a proactive outreach strategy.
  5. Systematically and proactively manage disputes. Manage and resolve disputes promptly as they can significantly impact DSO and quickly cause customer abrasion.
  6. Tie sales incentives to collection targets. A well-designed sales incentive program linked to real-time visibility into incoming collections significantly improves sales effectiveness.
  7. Accurately forecast cash availability by applying advanced analytics. Cash availability includes accurate trade and non-trade collections and cash balances.
  8. Optimize supplier payment schedules considering predicted cash availability and tradeoffs. By linking receivables to payables and incorporating early payment discounts and late payments penalties, an optimal payment schedule minimizes borrowing and saves cost.
  9. Automate payments by integrating to cash analytics, and use the power of data analytics to drive decisions in real-time.
  10. Accounts Receivables financing. Opportunistically tap into invoice financing without increasing debt leverage but it can be expensive with 2-15% fees.

SimpliCapital empowers finance leaders to manage their company’s cash flow real-time. An inbuilt AI engine solves all the above problems through proactive alerts and recommendations to optimize cash flow.

Contact SimpliCapital (info@SimpliCapital.ai) to learn more.

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