LONDON--(BUSINESS WIRE)--The core element of every business is efficient cash flow management, as cited by SpendEdge, a procurement market intelligence firm in their recent findings. It is easy to manage direct spending; however, it may not be the same for indirect spending. Similarly, keeping a tab on the company’s revenues and expenses can seem quite simple but neglecting to monitor how cash enters and leaves the company’s accounts can put the company in danger.
Most businesses consider cash flow management as purely the domain of the finance department, but procurement market intelligence experts at SpendEdge think otherwise. They claim this is an area where, with the right procurement solutions, can have a significant impact on spend analysis and determine opportunities for improvement.
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SpendEdge, in their recent article titled, “How Procurement Can Help Maximize Cash Flow” lists some of the key aspects that procurement can monitor and improve an organization’s efficient use of cash:
Inventory is a major support for business deliver function, which determines the strength of the supply chain. It is extremely dynamic, and with careful inventory monitoring, excesses and shortfalls can be minimize, which means less money tied up in inventory, as well as less danger of losing sales due to running out of stock.
Using analytics in decision making
Analytics has become a major decision-making tool that can help organizations monitor costs and benefits, help decision makers control risk, and measure outcomes. The most common methods used to evaluate data during decision making are predictive analytics and descriptive analytics.
Analytics can help point out ways to consolidate orders or vendors to improve rates. It can also compare real-time spending to the company’s budget. Not only does this provide quick, valuable feedback on how current performance compares to planned spending, it also makes it easy to adjust spending as necessary, to account for a shortfall or take advantage of higher total cash than expected.
Maximizing value from payment terms
It is crucial for an organization to have complete visibility into how much they’re spending, with whom, and by what terms. This is where spend analysis plays an important role. For example, if the supplier offers a discount for paying within a certain timeframe, it is advisable to pay the invoice early. If the supplier does not, however, it is best to wait until the end of the invoice term and hold onto the cash.
Sometimes, negotiations with suppliers become more favorable, either for a discount for early payment or longer payment terms. However, longer terms may strain relationships with suppliers, so this should be considered carefully and not overused because strong supplier relations can contribute significantly to an organization’s success. Also, solid procurement intelligence solutions and comprehensive analytics can identify many ways to save money and optimize cash flow and are an important part of a successful business.
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