How BI Can Help Improve Your Cash Flow


Finance Insights for ProfessionalsThe latest thought leadership for Finance pros

Thursday, January 14, 2021

Improving cash flow is a common goal for many businesses, and it's an objective that can be easily achieved if you're equipped with accurate business intelligence.

Article 4 Minutes
How BI Can Help Improve Your Cash Flow

Improving business intelligence is a mission that can lead to a range of positive results for all sorts of organizations. One of the biggest advantages to be gained is greater control over your cash flow - something that’ll prove beneficial regardless of company size or the industry you operate in.

Optimizing cash flow is a particularly important goal for smaller firms, which have a range of common challenges to contend with. For example, research by Intuit QuickBooks shows that a third of US businesses estimate they have more than $20,000 in outstanding receivables.

If managing these sorts of cash flow issues is a vital goal for you right now, here's how business intelligence can help:

Tracking who owes you money

No business can succeed if it's constantly being paid late, or in some cases not being paid at all. This is a very common problem, with 51% of firms having outstanding invoices that were deemed uncollectable because clients had ceased trading or declared bankruptcy.

To optimize your cash flow and protect the business, you need to be fully up to date with who owes you money and what steps your debtors have taken to complete payment.

Accurate business intelligence will help you gain these insights and make informed decisions about what actions you should take to increase your chances of getting paid.

One particularly valuable cash flow-related insight is when the amounts owed to you are due, so you can act at the right time to manage the risk of late payment. A debtors dashboard can prove useful for presenting this information in a visual, easily digestible format.

Understanding how much you owe

Tracking debtors and ensuring you're being paid what you're owed is essential, but it's equally important to have a clear picture of your relationships with creditors.

Do you know much you owe, to whom, and when you need to pay it by? If the answer to these questions is no, you need better business intelligence.

There are several reasons why it's important to keep track of your payments to creditors, such as:

  • It helps you maintain strong relationships with your vendors and suppliers. This puts you in a stronger position to negotiate discounts or long-term supply agreements that’ll save you money
  • You'll be better-placed to manage your overall cash flow because you can make sure the money coming in is sufficient to cover your outgoings
  • The risk of incurring financial penalties due to late payment is reduced

The big picture on business performance

If you find that all your time is consumed by the everyday demands and challenges of running a company, opportunities to take a step back and analyze your overall performance could be few and far between.

It's important to make time to look at the bigger picture. Failing to do so puts you at risk of losing control of your costs and other commercial fundamentals, which could gradually erode your profits and put you in a difficult financial position.

Harnessing business intelligence and creating a dashboard to visualize key data like monthly sales, expenditures and profit margins will give you more power to make the right decisions, particularly where cash flow is concerned.

For example, if certain assets that are essential for your output are approaching the end of their lifecycle and will soon need replacing, you need to know if you're in a position to cover that cost.

Studying sales and customer activity

Another incentive to maintain an accurate picture of your overall performance through business intelligence is so you can answer questions like:

  • What are your best-selling products or services?
  • Who are your most loyal and profitable customers?
  • Which customers haven’t purchased from you in a long time and require some extra attention?

From a cash flow perspective, these insights help you make the right decisions in areas like acquiring stock, so you can ensure you're delivering your most popular products in sufficient capacity to meet demand.

You can also make informed marketing and sales investments that support your efforts to strengthen relationships with existing customers.

If they're based on accurate, data-driven business intelligence, these crucial financial decisions are more likely to deliver strong returns, putting you in a better position to achieve sustainable success.

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