Supplemental Capabilities for Cash Flow Tools

Here are some features that may not be essential in your cash flow management software, but that might prove useful if you can pay extra for a more complex program.

Managing the conversion of current assets into cash and the payments of current liabilities addresses major contributing factors that go into calculating cash flow.

Basic applications for accounts receivable and inventory will calculate ratios and relevant percentages that highlight how well you're doing in converting those assets to cash. A growth in the percentage of customer accounts still outstanding after 90 days can be a bellwether for collection problems. An increase in inventory that's disproportionate to the increase in cost of goods sold may indicate a buildup of slow-moving stock.

But viewing reports is passive management of cash flow. Active management, which improves cash flow, requires more work and maybe also a more flexible cash-flow application. If collection of receivables is a sore point, you need to look for a way of enhancing the collection process, through a series of dunning letters, for instance. Some applications allow even more flexibility. The latest version of NetSuite features a scripting language which can modify workflows. For example, if an invoice is more than 90 days past due, you (or your programmers) can program NetSuite to create a phone call record which schedules a collections agent to call the customer.

On the accounts-payable side, basic payment systems resemble checkbook writers, rather than true accounts-payable management applications. They assume you will create a check at the same time you enter the supplier's invoice. A true accounts-payable system will let you enter an invoice with due-date information. You will then have the opportunity to decide whether you wish to issue a payment on or before the due date, or to delay payment. In a cash crunch, for example, you may wish to delay payment of invoices due after 30 days to the 60-day mark. A good accounts-payable system will provide a schedule of estimated future cash payments, day-by-day if necessary, based upon the invoices entered into the system.