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How important is cash flow management in procurement?

by | September 28, 2018

Cash flow management and procurement are linked in many ways. It’s crucial to know how cash comes into the business but also having a strategic approach on how cash leaves the business is just as important.

Visibility on the organisation’s resources is mandatory in order to keep the cash flow managementment under control. Understanding how money is spent through vendors/ suppliers or how your employees are spending is critical in keeping cash flow under control.

Strategies for improving cash flow

1. Learn and understand customers payment cycles

This will undoubtedly help you become much more organised. Customers usually have different payment dates, incorporating that information into your payment system will help you have a much clearer better view into your cash flow. Missing a date can lead to missing a payment and that will unbalance your cash flow.

2. Try to get the best deals

To be sure you get the best deal, asking for multiple offers from different suppliers is  key. But also being careful to get the best quality of products/services is just as important. Organisations should regularly check their deals and make sure to choose the best cost-effective supplier.

3. Negotiate payment terms with customers

Suppliers can sometimes offer discounts for early payment or you can ask for extended periods for paying in order to have more control over your cash flow. There are many ways in which deals can be made regarding this.

4. Using data and analytics in decision making

Tracking data can help you have a better view over your cash flow and also helps you avoid mistakes like duplicating payments or not keeping track on invoice payments

5. Having an electronic invoicing system

E-invoicing enables an organisation to automate their invoicing process. By implementing this type of solution organisations can reduce costs, have a faster payment cycle and improve cash management, etc.

These are just a few strategies to keep in mind when thinking of improving cash flow management in procurement. Procurement technology can help you determine ways of saving money and improving cash flow and also upgrading your procurement function.

If you are interested in knowing more about how to improve cash flow in procurement, let’s have a chat!