How to improve your cashflow

Businesses traditionally directed their cash flow management requirements to their finance departments. But today, many are realising that global procurement companies, when paired with the finance department can play an instrumental role in achieving better cash flow. Below are the many ways in which global procurement companies continue to benefit the bottom lines of UK businesses.

More Money Saved on Orders


Companies and individuals involved in global procurement negotiate with suppliers for the best prices. In return, the supplier receives increased supply security or more business. Partnership with a procurement company can yield even more benefits, especially to small and mid-sized businesses, as these companies often cover multiple cost categories.


Longer Terms for payment


The negotiation of extended terms for payment is another function that a procurement company can obtain. But they can also ensure that these extensions are built into the terms of contracts, as well as watching that they are applied across all suppliers. The key, in this case, is to stretch terms just enough to boost cash flow, but not too much as to damage supplier-company relationships.


Procurement companies can go a step further, assisting the finance department with support should any breaching of payment terms occur. In this case, the arm of procurement can act as reassurance to senior management of suppliers to explain the cause for the delay.


Invoice Payments


When complaints are received that result in slower or no payment of invoices, procurement really shines. Not only will its work in commercial redress and root cause analysis help to tighten the rules and processes of the supply chain, but it will address problems right away. This ensures that any complaints are also resolved to client expectation as soon as possible, which will lessen the impact on cash flow overall.


Stock Level Optimisation


Another way to improve cash flow is to optimise stock levels. Because procurement will already be working with suppliers to source the best deals, they can also assist with keeping stock levels from becoming excessive due to attractive lower per-unit rates, a silent killer of cash flow. As well, a skilled procurement professional can know when a low per-unit cost will most benefit the cash flow of a company.


Mitigation of Fraud and Risk


Global procurement can also mean that a company’s system contains the necessary elements to mitigate expense fraud and the risk of maverick purchasing. By negotiating only with those suppliers who accept official purchase orders, for example, a procurement company can help to eliminate off-contract orders which can often be a higher price and have a negative effect on cash flow.


Lower Interest Rates for Borrowing


When a business requires a financial boost via borrowing, the bulk of funding is up the finance department to solve. However, when it comes to getting the best deal through commercial skill and negotiation, procurement companies can prove a worthy ally. In fact, any aspects of a borrowing deal that will improve a business’s cash flow can be enhanced with the many skills that procurement professionals possess.


Foreign Exchange Monitoring


Global procurement companies can ensure better cash flow by ensuring that foreign exchange rates for raw materials such as plastics and paper are in their favour before moving forward. This is done through the effective monitoring of the market. This way, a business can do what’s in its own best commercial interest instead of having to rely on information from suppliers, which may or may not be driven by their need for increased revenue.


Keeping on top of cash flow continues to be of critical importance to companies. And procurement’s many skills can ensure that a business’s cash remains king.