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Feb 12

Reduce Inventory and Receivables Financing Costs

There are two cost drivers that often mean the difference between making a profit on a sale and incurring a loss. One pertains to the high costs to finance inventory, while the other pertains to the high costs to finance receivables. Every business would love to be able to lower both. One includes having high inventory turnover rates, and the other relies upon finding customers who pay on time, every time. Most companies understand that doing both is extremely difficult, if not next to impossible. Unfortunately, both of these costs are exacerbated when companies run manual processes, processes that are based on running inventory and accounting on excel spreadsheets. Imagine the damage that is incurred when companies run both of these business functions on separate spreadsheets. Imagine how difficult it is to reconcile inventory and accounting when neither of these methods is live and neither of are capable of “speaking” with one another. It is the perfect storm and easy to see how manual processes do nothing more than make these costs more severe. What is the solution for those enterprises that want to do away with these high costs?


The importance of enterprise mobility software

Both of these aforementioned cost drivers can be improved upon when companies decide to move away from manual processes, and instead use an enterprise mobility software package that upgrades their entire operations. Warehouse personnel can immediately update inventory counts with rugged handheld computers. They can register incoming shipments of finished goods, parts and raw materials with barcode scanners. They can empower purchasing to use the company’s economies of scale and volumes to negotiate more favorable pricing, delivery costs and payment terms. Field service technicians and salespeople can be provided with similar mobile computers in order to provide customers with up-to-the-minute updates on product availability. So, how does all of this help lower a company’s inventory and receivable financing costs? Read on!

Stronger cost management

Inventory financing costs are simply those costs that pertain to buying and holding inventory for long periods. These costs pertain to a company’s costs of borrowing money. The cost of capital, or cost of money, is always part of buying and holding inventory. Unfortunately, manual processes are prone to error, and it’s these errors that ultimately force companies to purchase too much inventory. Too much inventory and the company will have more money tied up, and therefore, higher financing costs. The right mobility solution can ensure that inventory is better managed and that ultimately, these costs are lowered.

Stronger account management

What does it take to better manage a customer’s account? Does it simply mean to sell more and increase gross profit, or does it also include helping to manage the customer’s credit limit and terms? Well, every company knows that a customer can only purchase what their credit limit and terms will allow. When your sales team has access to mobile computers, they can gain advance notice of any issues pertaining to the customer’s account. Granted, it’s up to accounting to manage receivables, but we all know that sometimes sales is called upon to lend a helping hand. The right solution can ensure that that your customers never exceed their terms simply because of an inaccurate manual process, or excel sheet, didn’t stop them from placing another order.

Better operations management

Upgrading to enterprise mobility solutions is all about better operations management. Lowering inventory financing costs is a much easier process when the information emerging from the warehouse is accurate and live. Managing a customer’s credit limit and terms is much simpler when both accounting and sales see the same information. Ultimately, it’s about better operations management and it’s through better management that your company will be able to reduce its financing costs on inventory and receivables.

Most companies have a hard time reconciling their inventory levels and customer payments via excel spreadsheet, and for good reason. They aren’t live and can only be updated by one user at a time. This makes managing inventory and accounting extremely difficult, not to mention, very costly. However, the right enterprise mobility solution will ensure that your entire operations are better managed. Ultimately, it means you’ll have stronger cost controls throughout your supply chain and your accounting and sales departments will have stronger cohesion when managing a customer’s credit limit and terms.

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