Professional liquidity management is particularly important in today’s world. The COVID19 crisis caused a sudden upturn in some companies, while others have struggled with a sharp decline in sales. The Creditreform credit agency, for example, expects a noticeable wave of insolvencies as early as fall 2020. So it makes sense to take a closer look at customers these days.
Monitor your debtors’ payment behavior to ensure that any abnormalities are quickly noticed. Bear in mind, though, that not every change indicates your customer’s imminent insolvency. Payments are often only delayed in order to preserve liquidity.
Pay attention to your payment methods. Adjustments in this precise area can significantly improve the efficiency of payment traffic.
Business Intelligence (BI) products such as Microsoft Power BI deliver valuable information to you. For example, a graphic dashboard of outstanding items on the customer and supplier side provides the transparency needed to evaluate the amount and relevance of outstanding accounts. More details can be viewed with mouse-over effects or by clicking on relevant items. You can use analysis functions to analyze large data sets by attributes such as date, customer, region or supplier and to answer different questions.
Customers’ payment behavior provides important information on current bad credit risk. The DSO (Days Sales Outstanding) indicator shows, for instance, how many days have elapsed since the invoice was issued. If this number is high, measures to achieve faster collection of payments are advisable. For example, if you
• optimize the dunning procedure
• adjust cash discount terms
• broaden payment methods, and
• switch to subscription models for services
you could see faster, more reliable payments. If you need to follow up on outstanding accounts, emails are currently more efficient than the telephone, as many accounting staff continue to work from home. If the DSO ratio falls as a result, this is an indicator of the success of the measures.
On the accounts payable side, you could simply sit out your suppliers' invoices. However, this may not be such a good idea if you value an intact supply chain and a good relationship with your partners. Here, too, key figures provide information on potential for optimization. They help to unmask purchasing or accounting errors such as double or overpayments or to make greater use of discounts and bonuses. Do you work internationally in several currencies? Then cash dashboards can help you ensure currency liquidity and avoid costly unnecessary conversions.
All the data you need to optimize your cash management is already available in the ERP system. The trick is to present the information in such a way that it can be readily analyzed and supports business decisions. COSMO CONSULT provides companies using Microsoft Dynamics NAV or Microsoft Dynamics 365 Business Central with predefined business content with the cc|bi dynamics data & analytics solution, which allows you to build dashboards and analyses of key figures ready for immediate use. A good example is cc|bi dynamics cash for liquidity management. Its short implementation time saves resources and ensures a speedy return on investment.