Three business benefits of Enterprise Resource Planning (ERP) are significant as far as methods for quickly increasing the cash flow within an organization. These are also the fastest ways to recuperate a return on an ERP system investment:

• Better Inventory Management
• Reduced Costs (through Better Inventory Management as well as other efficiencies)
• Lower Days Sales Outstanding (DSO)

ERP implemented correctly drastically improves inventory management – leading to many increased efficiencies including reduced costs. The focus of this post is how ERP enables faster cash collection through a lower Days Sales Outstanding (DSO).

It’s still critical to remember cash generation — or, rather, consistent and material cash generation. It’s the biggest factor in the long-term success of any business.”

– JOHN STEPHENS, CFO OF AT&T

A lower DSO ensures that the organization is collecting on its customer invoices as quickly as possible. Finances are negatively affected with a high DSO, as revenue is being held in customer accounts instead of being quickly fed back into the business for operational expenses or investments.

ERP systems provide accurate and timely information that is needed to collect on invoices quickly. Effective use of a few key ERP tools can ensure a lower DSO. This is a major business benefit when implementing an ERP system, and is also one of the best ways to see a rapid ROI on the ERP investment.

By creating internal alerts customized to your business needs within the ERP system, you can be alerted in real-time when an invoice becomes past due, payment is incomplete, or any other event occurs. This allows you to take immediate action, driving cash into your business much faster. The system can send automated internal email notifications, and show a notification on the ERP interface upon login. Regular review of your books online, through these notifications will speed up the process of capital collection.Alerts can also be used externally. The ERP System can send automated emails to customers reminding them when a payment is due, in the case that your organization does not want to individually reach out to remind clients of invoices. Additionally, changes can be made based on the reports you can access in the ERP software– for example, if a customer is consistently late on payments, within the system you can adjust their payment terms for more effective collection.