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Managing Cash Flow During Summer Slow Down

For many businesses, the summer slow down means reduced cash flow - multiplied tenfold by the COVID-19 pandemic. AP automation solutions and cash flow analysis helps companies plan how to get through slower months.

Summer is typically characterized by rising temperatures, out-of-office email replies and a slowdown in sales for many businesses. Combine this with the recent (and continuing) effects of the COVID-19 pandemic on the global economy, and it’s no surprise that organizations are experiencing a significant downturn in activity right now. 

But this period of downtime doesn’t have to affect your business negatively. With the right tools, smart companies can manage cash flow effectively and come out on the other side of financial slowdown ready to drive their business forward. Consider some suggestions on how you can use AP automation solutions for cash flow analysis to navigate quiet periods successfully. 

Use the Break to Prepare for the Rebound

Just because your company sees a slowdown - whether as a result of the summer season or of extenuating circumstances like the pandemic -  doesn’t mean you need to slow down work efforts. Consider using this period of time to set yourself up for a stronger recovery. For AP, in particular, this is a great time to work on improving your process KPIs. Take the time to analyze the various AP processes and highlight areas that need to be optimized. For example, analyze the amount of invoices always routed to the same approver and configure a supplier responsible, or review tolerance levels to improve the number of invoices processed straight through (touchless ratio). According to the recent Ardent Partners Report “The State of ePayables 2020: Ensuring Continuity, Building Resiliency, and Rising to the Challenge”, which was underwritten by Medius, “invoices processed straight through” equals 67.2% for “best-in-class” companies and only 21.2% for “all others”.

You can also set up a “summer school” for your employees during the slow period. Hold refresher courses for the business tools you’ve implemented or plan to apply soon. Bring in a consultant to review your current AP automation solutions and enable you to reach higher levels of automation. Or find free educational resources online that will help develop your professional skill set. Modern AP providers go beyond systems; you should expect customer success documentation and webinars focused on optimizing and improving process KPIs as part of their service offerings.

Take Time to Review and Negotiate Better Terms

Keeping your company’s cash flow in a stable position during periods of financial uncertainty is crucial. Thankfully, this period of time also provides an opportunity to take advantage of the insight offered by AP automation solutions. Review your budget and look for areas that may put your cash flow at risk. Are your fixed costs, such as rent, payroll, or infrastructure costs putting you in a tight spot? Convert any unnecessary costs to more variable terms, such as shorter lease terms or temporary staff coverage. 

Explore your current vendor terms to see where to make improvements. The best suppliers are as much invested in your success as you are, and might be more willing to extend payment terms or allow better discounts if it means the difference between success or closing the account. For less flexible suppliers, take the time to update their profiles in the AP solution as well as double-checking that all of your supplier data is up-to-date.  

Explore the Archives

There’s a rich level of data housed in your AP automation that can effectively shape the business’ strategy for the coming months. Using the archives in your solution, develop a 12-month rolling forecast that you can regularly update at the end of each month. 

This forecast can put AP at the helm of the company’s strategic cash flow management, helping the company think ahead by mapping out the patterns of the business. Are there fixed costs, such as building lease renewals, that happen year-after-year consistently? Is there an abundance of cash at the beginning of the year for the IT project you’re considering investing in? Can you maximize your cash flow during the low swings by timing when you pay a specific supplier to take advantage of discounts? All of these patterns are crucial for protecting your cash flow and make AP a strategic asset to the C-suite and the rest of the business. 

Put Off Costly Expenditures

With the data from your archives and your 12-month rolling forecast in hand, you can avoid the overlap of paying for costly expenditures during the months when cash flow is at risk. However, this data is only helpful if it makes it out of AP’s knowledge base. Share the importance of timing with the rest of the finance team, so AP and buyers are aligned throughout the year.

Work on Supplier Financial Health Analysis Reports

Use your downtime to get to know more about your vendors and suppliers. The C-suite and AP are the perfect pair to team up and work on financial health analysis reports for suppliers to determine where their business stands and how that impacts the future of your company and its dealings with them. Some of the health check metrics you may want to consider include:

  • Profitability
  • Cash flow
  • Liquidity
  • Leverage

Once you’ve assessed the health score for your suppliers, keep records of each year’s scores for the suppliers in the supplier’s account details. That way, you can compare scores from the previous year(s) and draw trends of improvement or degradation. 

While a slowdown in your business can be concerning, it can also provide you with the chance to work on continued education, data analysis, cash flow analysis, and organization of your AP data - setting you up for a successful rest of the year. Powerful AP automation solutions support your slow-season endeavors by taking care of manual, paper-based tasks so you and the AP team can focus on value-add work. And it also opens the window to a clearer, more accurate picture of your company’s payables and receivables. With this insight in hand, you can manage your cash flow with confidence and efficiency, no matter what.

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