Top 5 ways that data analytics can help manage your cash flow

We all know at this point that the economy has been hit hard due the global pandemic and now many companies are facing a significant financial downturn, being unable to maintain desired profit margins and generate the cash flow they need to fund normal operations.  To help remedy this, distribution businesses can leverage their data by looking at what products their customers are buying the most and then determining how they can supply these products.  Data analytics allows you to easily see where your cash is coming from and where it is getting used up which in turn helps you analyze the health of your entire supply chain.

How can the right data analytics solution help you drill down into your transactions to uncover a better understanding of your cash flow during this unprecedented and unstable time?  Here are the top 5 ways:

1 – Lower variable expenses

Immediately reduce your cash outflow by looking at how you can lower your variable costs rather than only focusing on cutting your fixed costs.  Areas to examine include your wages, materials, utilities and travel.  These costs fluctuate with your level of business activity, so taking actions such as restructuring the working week, stopping business travel, cancelling unneeded office provisions, and putting a freeze on new hires would be a good start. Encouraging employees to take their unused vacation time now would also be a sensible strategy to save cash in the long run.

2 – Optimize inventory

One of the best ways to improve you cash flow during difficult times is to optimize your inventory.  Data analytics can help you review your product categories, suppliers, and SKUs in order to make informed decisions.

Companies selling products that are in high demand currently need to find ways to secure additional stock if their regular suppliers are running at capacity. If you are unable to source stock for orders due to suppliers being closed, being proactive with customers by offering substitutes or finding ways to work with them to delay the order may be required.

In contrast, companies who are experiencing little or no demand for products need to consider ways to lower their inventory expenses to decrease cash outflow and focus only on stocking products that are selling.

3- Manage receivables

If your company has been lax with receivables historically during better times of low interest rates and business being good, now is the time to re-examine how you control your receivables.  If you already have customers that need to delay their payments, you will now need to work on improving your collection process.

Make sure that your invoices are being issued on time and are accurate.  Errors can lead to costly payment delays.  Data analytics can assist you with running a report to verify which customers are paying past 90 days that need to be contacted for collection, as well as identifying who may need to change their payment practices.  Additionally, you can look at which customers may be able to pay you quickly and offer them dynamic discounts in return, which basically allows you to pay your clients to finance you in the short-term (after performing a thorough cost-benefit analysis, of course).

 4- Re-examine backorders

Review your backorders to see which of your customers are buying what so that you can manage your cashflow from an operational standpoint.  An issue to look out for is an open sales order that does not match up with an accompanying open purchase order.  Common reasons this would be occurring right now would be the product has not yet been ordered, or the supplier has not shipped yet or is shut down.  Your chosen analytics solution should be able to quickly identify which vendors are supplying and which are not.  This practice can help your team prioritize product availability to ship and determine substitutes to fill outstanding orders.

5- Prioritize your customers who need your product

Your company’s long-term success depends on how well you know your current customers and how well you can adapt to serving their changing needs.  One of the main value-adds a data analytics solution provides is having the ability to identify the sectors and specific customers that are buying from you right now.  You need to be able to responsive to your active customers in a timely way in terms of whether you have the stock to supply their current needs.  Analyzing your data will also show you which customers are unlikely to buy from you right now, which will help you focus on prioritizing your customers that need you currently in terms of your available resources.

In light of the impact that COVID-19 has had on our economy and state of affairs, NewIntelligence wants to do their part.

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