Is deficient technology the real culprit in SME cashflow challenges?

Nine out of ten SMEs report their growth is hampered by cashflow challenges, according to the most recent Scottish Pacific SME Growth Index, which polled SME leaders across Australia. The same study found that more than one-fifth of businesses could not take on new work because of cashflow problems.

These statistics may sound pretty straightforward but I would argue that cashflow issues are the symptom of an underlying problem.

More often than not, cashflow issues are really a result of technology shortcomings. The fastest way to solve this is to get both your technology and business processes up to speed. Here are the top three factors to consider.

1. Do you have the right tools?

Managing your company’s financials is the backbone of your business and vital to its long-term health and viability. But paying attention to your bottom line often takes a back seat during times of increased focus on revenue and growth. By making sure your team has the required tools to monitor business growth, you limit wasted time on manual and duplicative tasks, cutting out unnecessary work.

When spreadsheets and workarounds become the norm, last-minute sales are at risk if not entered into the system and financial close times take weeks to complete, it’s time to upgrade your financial management system. Critical processes such financial consolidation, multi-state and country taxation, and reporting on multiple currencies can become a huge productivity drag on your entire business and is often plagued with errors. Add on regulatory requirements such as revenue recognition and changes in accounting standards across the countries you’re operating in, and the pressure is multiplied.

2. Do you have the basics right?

Every financial management system needs to have basic accounting functions with a built-in audit trail. Beyond basic accounting functionality, your financial management system should also be able to accommodate future growth while allowing you to keep an eye on daily operating expenses.

Cashflow issues typically arise when you’re faced with unexpected costs such as permits, licenses, raw materials, and vendor agreements. Your financial systems should be able to monitor more than just what revenue is generated and expenses are paid. It should also perform cashflow analysis to examine the areas of your business that affect cashflow, such as accounts receivables, inventory, accounts payable and credit terms.

3. Do you understand your data?

Accurate, up-to-date and holistic data is a must have to make timely, informed decisions. But information is often stored across multiple, disparate systems making manually-based data management processes time-consuming and error-prone. Managing your cash is not just about reconciling the bank account – it’s about having a complete understanding of the supply chain, payment terms and the wider requirements and commitments within your business.

Understanding the performance of every aspect of your business requires real-time visibility into your operations. As such, you need to consider solutions that offer true insights into your business and use key performance indicators (KPIs) to alert you to discrepancies and “red flag” situations where cashflow might become a problem. For instance, if you see consistent declines in your sales or profit margins, discover unpaid invoices, or foresee potential issues in your stock supply and management, you can act as appropriate and potentially avoid a catastrophe.

With a real-time view across your operation, from manufacturing and warehouse to supply chain and customer service, you can more accurately forecast the demand for your products and services, scale your manufacturing or delivery processes accordingly and stay ahead of any cashflow woes.

Lee Thompson, Group Vice President & GM, Asia Pacific and Japan, Oracle NetSuite

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