Integratz has worked with leading B2B distributors for over 30 years- and a constant struggle these companies face is maintaining sufficient cash flow to confidently invest in growth while still covering day-to-day operations.
Too often, distributors of all sizes end up leaving massive amounts of cash unnecessarily tied up due to outdated processes and manual systems.
The good news? Streamlining and optimizing just a few key areas of your business can unlock hidden potential and rapidly accelerate cash flow. Here are 5 proven strategies we've used to unlock millions:
1. Speed Up Accounts Payable
The Impact:
Slow accounts payable processes wreak havoc on cash flow. Industry studies show the average company misses out on over 95% of available early payment discounts due to invoice delays. A company paying $100M to suppliers with typical 2% discounts is leaving over $1.9M on the table annually. Late payments also incur hefty penalties - $200K per year for a $500M distributor with a 55% late rate.
The Warning Signs:
Does it take over 15-20 days on average to process invoices from receipt to payment? Do you struggle with manual invoice routing, approval bottlenecks, and high dispute rates that drag out payments? These are key indicators of AP constraints impacting cash flow.
The Solution:
Implement intelligent AP automation to accelerate every aspect of invoice workflows. Digitize invoicing, automate data capture and coding, configure smart routing rules, and escalate exceptions automatically. Solutions like this shave weeks off cycle times to capture more discounts and prevent late fees.
2. Eliminate Manual Data Entry
The Impact:
Manual data entry errors and rework directly hit the bottom line. Studies show that for every $1 companies spend on manual data entry mistakes, it costs them $10-30 to fix those errors. These costs reduce efficiencies and cash flow.
The Warning Signs:
Do your teams frequently have to re-key important information from customer orders, supplier invoices, or other documents into your systems? Are there recurring issues with data accuracy and quality? These are signs your company is wasting money on preventable errors.
The Solution:
Adopt data capture technologies that automate the extraction and entry of key data from common business documents. Solutions like OCR, e-invoicing, and automated order entry eliminate manual data entry so staff can focus on higher value activities. Errors drop, efficiency rises, and cash flow improves.
3. Streamline Customer Collections
The Impact:
For most B2B companies, cash tied up in outstanding accounts receivables represents their single largest use of working capital. However, the average company has over 15% of total revenue stuck in late invoice payments. Accelerating collections by just 10 days provides the equivalent of adding 3% back to operating cash.
The Warning Signs:
Does your Days Sales Outstanding metric exceed 45 days? Do you struggle tracking customer payment history, aging reports, and prioritizing collections calls? These demonstrate opportunities to optimize collections and improve cash flow.
The Solution:
Move away from manual collections processes. Implement automated payment reminders, customer payment portals, discounting for early payment, and cash application automation. Leverage analytics to identify high-risk outstanding invoices and persistently late payers. Reducing DSO pays out in spades.
4. Upgrade Inventory Management
The Impact:
Distributors, manufacturers, and others carrying physical inventory free up significant cash flow by reducing excess stock levels. Every $1,000 in superfluous inventory is $1,000 of working capital tied up on shelves. For a $500M distributor, a modest 5% inventory reduction would provide $25M in recaptured cash.
The Warning Signs:
Are you frequently expediting shipments due to stockouts? Or do you end up discounting excess inventory because of overstocking? Do teams rely on gut feel and spreadsheets instead of smart forecasting and optimization tools?
The Solution:
Leverage modern inventory management and optimization technologies. Solutions like inventory forecasting, smart categorization, barcode scanning, and real-time visibility allow you to tightly manage stock to meet demand without cash sinks. Automation keeps you lean.
5. Centralize Reporting & Analytics
The Impact:
It's impossible to effectively manage cash flow if you have limited transparency and data across departments. Implementing consolidated reporting and analytics saves time, effort, and uncovers opportunities to power growth. Even a 5% efficiency gain on $50M in distribution costs yields $2.5M back to the bottom line.
The Warning Signs:
Do you find it difficult to quickly determine your current cash position, total inventory value, outstanding receivables, or expected outgoing payments? Do siloed department reports provide scattered, partial views into the company's financial health?
The Solution:
Unify data by implementing centralized reporting and analytical dashboards spanning all key operations - AP, AR, procurement, inventory, cash, etc. Visualize and track key metrics like cash flow forecasts, collections, inventory turnover, payables variance and more. This provides the insights to strategically manage cash.
The Bottom Line
Our top-performing clients that have executed on these strategies have seen rapid payback in the form of recouped working capital, reduced overhead, and exponential cash flow gains to fund their next phase of expansion.
Optimizing just a few core areas can swiftly rejuvenate cash flow and free up working capital for growth!
Are you interested in shedding light on your own AP flows? Let's connect to discuss mapping your processes, diagnosing pain points, and spotlighting savings. We work with your current systems to identify the right processes and reduce wasteful ones, build secure and stable automated workflows, and bridge the gap between new and existing systems. If you have struggled with invoice processing and you’re noticing a hit on your bottom line, we'd love to connect. Set up a time to talk to our team to learn more!
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