This article is based on using Sage MAS 90 and MAS 200 tools but is applicable to most any ERP system and business.


Avoiding cash flow crunches is often a challenge, particularly in tough economic times. Customers start paying a little later, while at the same time suppliers tighten their credit and payment policies. To survive the economic slowdown and be positioned to prosper when economic conditions improve, it is essential to proactively manage cash. In this article, we will take a look at ways you can more effectively manage your cash flow.

Make And Follow Credit Policies

Naturally, the area in which you can do the most to keep cash flowing is in collecting from your customers. But you also must avoid selling to customers who can’t pay — no matter how much you need the business.

Create procedures to check credit before giving terms. Make certain that your customer-facing staff members understand your credit policies and that they follow them. Make it a practice to require that e-mail addresses be included with credit references. It is then a simple matter to set up a template in Custom Office with the credit questions you need answered, thus automating the reference checking process. It also may be wise to recheck the credit standing of existing customers, as their rating may have changed due to the current economic downturn.

Once you have assigned a credit limit to a customer, make sure you take full advantage of the powerful Credit Checking features that are available in Version 4.1 and above. In AR Options, you can choose to base credit limit checking on a dollar limit, an aging category, or both. The Dollar Limit option compares a customer’s balance to the credit limit set for them. The Aging Category option allows you to base credit checking on past due amounts. For example, if you set this option to the category of 90+ days, only balances in this aging bucket will be used to determine if a customer has exceeded their credit limit. In addition, you can include open orders in the credit check, thus obtaining a complete view of your customers’ financial commitments.

Motivate Customers To Pay

Keep your organization at the top of your customers’ minds with reminders of amounts due. If you sell products, be sure to mail the invoice the same day the product ships so it goes into your customers’ accounts payable system promptly. And if you are a service-based business, bill your clients twice a month or once a week instead of monthly.

Don’t wait until the invoice is due to remind customers of their obligation. You can generate mid-month e-mail reminders based on criteria within your Sage MAS 90 ERP database; use Business Alerts or Sage KnowledgeSync to make the process automatic.

An excellent way to ensure timely payment is to institute both early payment discounts and late payment charges. Even a small discount can motivate prompt payment, as can penalties for paying late. Print these terms prominently on invoices and statements.

Implement A Deposit Policy

For large orders or engagements, request an up-front deposit of up to 50 percent. This enables you to cover costs such as material and labor before fulfilling the order.

Accepting credit cards makes it easier for customers to pay on time. They may not have the money in the bank, but they probably have available credit on their credit card. Accepting credit cards also makes it easier to collect deposits up front as discussed above.

Stay On Top Of Receivables

Make a point of reviewing outstanding receivables on a weekly basis, and take prompt action when amounts become past due. Regularly review total receivables and past due amounts over time so you understand your cash flow trends. The AR Analysis report gives you a graphical view of receivables status that can help you quickly identify potential cash shortfalls and take early action. The Cash Expectation report provides a comprehensive picture of outstanding customer invoices due for up to four consecutive periods and one future period. To obtain a realistic picture, due dates can be calculated using the average days to pay information for each customer. Totals are provided by customer and division, with a total of all payments due within the period-ending dates specified.

Don’t Leave Money On the Table

Regularly compare your pricing structure against actual costs to make sure that your products are profitable. Small increases are easier for customers to accept.

Are there services you give away that you should really charge for? Do you go out of your way to process rush orders, but fail to charge extra for the service? What about local delivery services? Does your service-based company too often not bother to bill for a five-minute phone call? What about handling charges for shipped orders? Think about what services you are currently giving away for which you could (and should) charge fees.

Reduce Inventory And Streamline Product Lines

Excess or obsolete inventory adds a heavy burden to your costs. Can excess inventory be returned to the vendor? Could you reduce the number of SKUs by eliminating low volume or similar items?

Negotiate With Suppliers

Suppliers value your business and are often willing to offer special terms, especially for larger orders, giving you time to collect from your customers. It is better to request special terms up front than to pay late.

Lower Banking Costs

Bank charges and transaction fees can really add up. If you do all your banking with one institution, or hold assets such as certificates of deposit, your bank may be willing to waive checking account and other service fees.

If you have several loans such as a vehicle loan, an equipment loan, and a business line of credit, review the rates and terms. You may be able to consolidate them into a single lower-interest account.

Sage MAS 90 Can Help

Have you optimized cash flow in your business? Sage MAS 90 contains the tools and features to help you implement many of these suggestions. An excellent way to anticipate potential cash flow crunches is through the use of the Estimated Cash Flow Analysis report in the Bank Reconciliation module. This cross-module report displays current cash in each of your bank accounts, adds in cash expected from Accounts Receivable, and subtracts cash that needs to be disbursed through Accounts Payable. The report can display up to four periods that you can define, such as weekly or bi-weekly. Give us a call with your questions.