With the global economy in a protracted funk, SMEs must take measures to ensure they have the resources to weather the crisis. To make matters more complicated, banks are still reluctant to lend to SMEs, forcing many companies to rely on their commercial cash flows for liquidity. While the depth and length of the economic crisis is difficult to forecast, there are measures businesses can take to help them get through it.

 Integrated financial applications help companies navigate the crisis by tying together critical information such as current cash balances and providing the finance people with a more complete picture of their sources and uses of cash. They also help companies forecast cash flows more accurately by integrating real time data from operational systems to provide a more accurate picture of the amount and timing of their commercial cash flows.

 Protecting your company’s cash flows begins before a sale is made. Companies must exercise heightened diligence in managing their trade credit. This requires more stringent reviews of a customer’s creditworthiness before approving the sales order. It doesn’t end with the initial approval; companies must also continually monitor their customer’s financial condition. Those who show any signs of financial deterioration should be carefully managed to prevent them from becoming a bad debt write-off.

 As bank financing gets harder to obtain, ensuring that invoices are paid in a timely manner takes on heightened urgency. The objective is to keep days sales outstanding (DSO) as low as possible. Companies can take steps to keep DSO low by minimizing the lag time before an invoice is sent out by linking order fulfillment and billing systems. They can also more closely monitor receivables aging and take action to collect on overdue invoices. Of all the factors that can drive up DSO, one of the more insidious is invoice disputes. Disputes are at best a cost of doing business in good economic times but they are a significant risk during an economic slowdown because of their effect on cash flow. Customers may delay payments for a variety of reasons--incorrect invoices, receipt of damaged goods or a shipment that is less than the amount ordered.

 Regardless of the reason, disputes must be resolved quickly because as long as they remain open, the DSO clock is ticking. The key is quickly locating the information needed to settle the dispute. However critical information such as sales orders and shipping records often resides in different systems. Attempts to gather information via emails and phone calls are ineffective because of their inherent time lag. What firms need is an integrated system that can maintain the sales order and invoice accounting trail and quickly route internal inquiries via workflows that allow employees across departments to collaborate, document their progress and resolve the issues quicker.

 Gain control of your Cash

 Electronic connectivity with your banks provides you with up-to-the minute information that greatly increases forecasting accuracy. Cash positions from across multiple banks rapidly reconciled with internal general ledger balances greatly increases the company’s cash management effectiveness, avoids costly overdrafts and unnecessary bank borrowing.

 While no one can predict how long the current economic crisis will last. One thing is certain, firms must manage their commercial cash flows and cash balances more effectively. Taking steps to ensure strong and unimpeded operating cash flows is one way businesses can cope with this crisis and better control over their cash balances goes a long way to ensure companies can weather the financial storm.