The white flag is right far a nose. towards million price of the dollar in money saving cash for your business. Up to now, in the inventory and the accounts receivable, we the ‘VE found $250.000 in money saving cash. Then we found another 250K in the sales and marketing. And thus, now, the accounts payable is the final process in the cash to box the cycle - and also the $250.000 final ones. The money cycle cash is undoubtedly the most important process simple to optimize for any businesses - when you spend the money with when you obtain the money.
To surround the cash to box the cycle
Thus again let us attach this to the accounts payable - the event which pays the responsibility incurred by the purchase, which is for the inventory required with manufacture to satisfy the request. The sales produce this request which creates the sums to receive accounts, which is transformed into money cash. And now we have the full come circle and achieve the discussion on the cash to box the cycle.
Increase the speed of the processes of accounts payable
Your accounts payable is a little different that the other processes which we examined up to now. The first three processes we looked at processes represented where the hearth was on reducing the size of the capital (inventory or accounts receivable) or of the expenditure (sale) and increasing the speed or the duration of cycle. But in accounts payable our home is on increasing the size of the capital, while maintaining a reputation of full solvency - and increasing the speed of the process.
Now let us look at how to find $250.000 in saving of accounts payable. If your organization has $500.000 in accounts payable each month, then STOP! We can find $250.000 saves some well here. Where, you ask? The sums to be poured increasing of 25% will produce $125.000 cash plus $125.000 from automating tasks, to take more discounts, and to better control the process.
Case study of procedures of service companies
An organization with $600.000 of sums to be poured monthly needed assistance. We examined their process of sums to be poured to include/understand and measure the course of operation, the treatment of paper and the exits of credit. Then we conceived and applied a process to increase their use of the sums to be poured and discounts, to improve their effectiveness of cycle of sums to be poured, and to attach it to their admissible purchase and cycles. We then reinvested $50.000 in a program of the planning of entrepreneurial resource (ERP) to automate again some of the processes which were not automated already.
The metric one that we developed reduced their purchase and expenditure of sums to be poured of 25% and increased their effectiveness by 50% to 75% in the 2 months to apply the new procedures. With these new processes and reports/ratios, the company now detects the effectiveness of cycle of sums to be poured and the sums to pour average days, rather than just of the invoices paid per hour or exceptional balance, as measures of their effectiveness of sums to pour. The result: from the $300.000 additional more cash one increase of 50% of the possibilities of process (capacity). But how?
Methods to conceive your accounts payable news and procedures of accountancy
Eliminate paper. The greatest simple cost for any purchase and department of sums to be poured is of paper, including: buying orders, follow-up of buying order, purchases of small-dollar, advance and received delivery, and payments of supplier. Using the invoices without paper, the files of individual-maintenance and centralized of supplier based on the WEB of supplier, courses of operation automated for the electronic invoices or refl?tentes (see the ERP below), and methods of payment, such as credit cards of businesses, the exchange of information electronic (EDI) and the electronic transfer of funds (EFT), can reduce less costs of transport paper close step than 90%.
Integrate the systems of ERP. The planning of entrepreneurial resource (ERP) automates the purchase and the functions of sums to be poured, which makes it possible a company to obtain more work carried out with little personnel. Moreover, the applications together with electronic invoice save time by seeking writings. It is estimated it that a system of ERP can annually save an organization $300 per million in the sales.
Increase the terms of payment. Negotiate the terms of payment based on the reception of the goods or the invoice. This can add one week or more to your limits, which can be 25% of 30 limits of day. Employ EFT so that the payments right in time maximize your limits of sums to pour and reduce at least the impact to your credit.
Take the discounts of payment. If you obtain to 2%/10 net 30 limits, then plan to take it. This means that you are offered to a discount of 2% if you pay in the 10 days, instead of the normal 30 limits of day. This translated into return of 18% on your capital, and for much of organizations it is a good return on your investment.
Purchases of review. The purchase is a continuous process which requires the review continues. Consider: transport costs, fees dispatched, odd penalties of fate, new evaluation, produced, consolidating suppliers, new suppliers or buying groups, terms of payment, and more. Communicate with your suppliers to improve the process. And review and monitor very to explain changes of your environment.
Communicate with suppliers. Communicate with your suppliers to improve the process. Ask the suppliers to subject their invoices electronically. This will save you times, resources and losses due to the loss.
Eliminate the conflicts. The conflicts with your suppliers are typically the result of a problem with your receiving process purchaser. When the conflicts occur, examine your methods of purchase to make sure that they produce the metric correct one and that you are not forced to pay your errors.
Reduce the errors. The excessive payments, the payments carried out with the false suppliers, the false invoices, or even the delays of payment represent a common problem for sums to be poured. The increase in your hearth on the ordering of error, with written procedures and audits, can reduce these errors considerably.
Personnel of train. Provide to your personnel accounts payable the regular formal formation. This will arm them with best knowledge with the frauds, of the qualifications of negotiation, and an arrangement of the economic scenes of the sums to be poured - which will have like consequence the improved effectiveness.
The accounting practices and the procedures for box the bank inside
In last weeks, we showed you four shares of your statements of the financial account which each one will contribute $250.000 in money saving cash. The last obstacle was accounts payable, and we sailed by him. And now we crossed our final objective: $1.000.000!
Time was - and is - the key. Very that you must make is to have it. And, you recall, the next week we will go up each of the four elements of the cash to box the cycle, and let us look at it how it affects the working capital of exploitation of your business.
