5 ways an ERP can improve cash flow

Updated: June 02, 2009

ERP Systems offer functionality that can streamline the contract, expense approval and payment approval process allowing an organize the flexibility to make real time decisions regarding cash flow

1. Purchase Orders - An ERP system allows for the quick creation of Purchase orders. By requiring purchase orders for all expenditures, an organization can quickly review and approve terms of the underlying contract. ERPs and Purchase Orders prevent the rogue employee from signing an unfavorable deal
2. Understanding commitments - Based on the total value of approved purchase orders, a business has real time access to liabilities or committed capital. Managing a budget versus committed capital prevents over expenditure compared to managing a budget versus actual expenses booked.
3. Receiving - ERPs offer the ability to receive against purchase orders as part of the invoice approval process. This allows the budget owner to confirm that what has been invoiced was actually delivered by a vendor and prevent over payment.
4. Forecasting - Most ERPs offer a budget forecasting model which allow various stakeholders to reforecast their budgets based on the timing of expenses. If the marketing department is under budget for a particular period, the positive variance to budget may not real, it may simply be timing. This module allows periodic updates to budgets so stakeholders can inform finance/accounting when expenses will hit.
5. Reporting - ERPs provide real time reporting so decision makers can view period expenses/cash flow. This provides a business the ability change its spending behavior ahead of the month end accounting close.