As I write this week, I find that we are preparing for Halloween. Everywhere you look there are pumpkins and cobwebs with giant spiders, skeletons and pointy hats, black cats and friendly ghosts. Yep, it’s that time of year again. For the most part, we don’t really find these things scary anymore. Little children dress as ghouls and super heroes, princesses and fairies, cowboys and aliens, astronauts and monsters.

The other part of this time of year that we just can’t seem to avoid is the reappearance of scary movies. Every kind of monster or thing that goes bump in the night or unknown danger that makes that teenage girl scream appears on a movie or television screen.

So, where am I going with this train of thought? It occurs to me that there are some things in business that can in fact creep up on us and cause real problems. Let’s take a look at a few of them … specifically those related to Cash Management policies and procedures ... and how Sage 500 ERP can help you address them.

In the Dark

In those spooky movies we spoke of earlier, nothing good ever happens in the dark. When the flashlight fails or the candle blows out, when the power goes out and the storm rages outside … that’s when you know something bad is about to happen. Yet, businesses operate in the dark all the time. You’re in a growth mode. Times are looking good. Then next thing you know, you’re having trouble making payroll.

Turn the lights back on. Use either the standard Financial Reports or Sage Intelligence Reporting to generate a simple 12 rolling month Cash Flow Projection. That way you can see the potential ebb and flow of cash. Once you see the patterns, you can then adjust and resist the temptation to make expenditures during the “flush” part of the year that will leave you scrambling during the “lean” times.

Payment Terms Quagmire

The next scene I want you to imagine is set in the jungle. You can hear the call of exotic birds, the chatter of primates in the trees, and the blast of a distant elephant. As we trudge along, one of our party steps into a patch of earth that seems to suck them under with each step they try to take. They are doomed. You just know it. The harder they try, the deeper they sink.

Believe it or not, we can find ourselves in a similar place in business. We can end up providing “float” to our customers while we sink deeper and deeper. When it comes to payments, we need to look at the average days to pay for our suppliers and customers. If our average days to pay supplier invoices is say 21 days, but our customer’s average days to pay is at 45 – that means we are providing 24 days of “float”. We’ve paid for goods we’ve delivered and invoiced but not collected the cash. Which leaves us with a couple of choices – Delay our payments to suppliers, or decrease the average days to pay for our customers.

There are a couple of ways to decrease the average days to pay for our customers. Certainly, using the alerts and MS Office templates in Sage 500 ERP to generate collection letters are a step in the right direction. If that’s not enough, it’s time to consider promoting the use of document transmittals for invoicing and credit card or (as of the 2014 release) Electronic Funds Transfers (EFT) to collect funds electronically. As of this release, you can collect cash up front through Sage Payment Solutions using the method that best suits the customer. The side benefit is, customers are happier as well. COMING SOON, we will have the ability to process invoices and payments in Sage Billing and Payment, a new on-line service provided through the Sage Data Cloud. Imagine reducing your Days Sales Outstanding (DSO) from 45 to 1 … now that would get you out of the quagmire!

Behind the Mask

Ah, the mask! Whether it’s the Phantom of the Opera or a Hockey Mask, a nylon stocking or a ski mask – something sinister is often hiding behind the mask. There are times when appearances can mask reality in business as well. An inventory item that is flying off the shelf may in fact be costing you money. The customer who appears on all of the sales reports with the highest overall sales month after month may not actually be making you any money.

There is a tool to help unmask these pretenders – and it’s available to you today – Sage Inventory Advisor. This dashboard view of your inventory will identify those items that have high turnover but low profit margins. Another view identifies customers with high order amounts but profit margins below expectations. Armed with this information, you can then make the necessary adjustments. Perhaps that item really is a great product but just needs a price adjustment. Or, you may need to renegotiate the terms extended to your top customer. In either case, seeing behind the mask removes the mystery – making it possible to deal with the realities and move forward.

Nothing to Fear

When my oldest was age two, we went trick or treating for the first time. She was petrified! I feared I might have scarred her for life. But, in the resilient manner of children – once she understood what was really going on, the fear went away. In business too there are scary things to be aware of. But, if we use the tools available to us and demystify the seemingly unaccountable ebb and flow, we learn that knowledge is control and we can achieve success and growth.