Is data blindness the cause of cash flow woes?

SMEs often simply don’t have the bandwidth or disposable cash to invest in their own in-house analytics function. What can be done? Here, we find out.

Research shows that while businesses are surrounded by data that could inform and guide their strategy and decision-making, they do not have the systems in place to maximise it. Instead, the majority of firms use outdated tools and models which are simply not up to the task of crunching vast data sets. This data blindness is a big problem and it’s having a direct impact on cash flow.

Prehistoric methods

According to a survey of 2,700 businesses by Tungsten Network, 80 per cent of firms use methods such as Microsoft Excel for complex data analysis and financial management tasks. Tools like these are just not designed to dissect and understand complex, rich data sets. This means that clunky spreadsheets are at the heart of almost every accounts team, bogging personnel down in slow, inefficient processes that require huge amounts of time, effort and concentration.

Unfortunately, most SMEs simply don’t have the bandwidth or disposable cash to invest in their own in-house analytics function and will often turn to time consuming or ineffective methods to manually visualise their data.

Worrying consequences

This is a real problem because when invoices can’t be tracked in real-time, big issues arise. Data becomes obsolete, payments can’t be processed fast enough and cash flow dries up. Sometimes firms base their actions on a gut feeling or hunch which of course might be right or might be totally flawed. We all know that the issue of late payment and associated cash flow problems can have a dramatic domino effect. Research from the Federation of Small Businesses reveals that late payment is sending 50,000 businesses into bankruptcy and costs the UK £2.5 billion a year.

However, without the budget, infrastructure or operational capabilities to invest in digital systems, many SMEs cannot see any other option. They struggle to predict cash flow and mine the data tied up in invoices. This means they are operating in the dark, missing out on the advantages that data analysis offers bigger companies.

The nation’s SMEs need to catch up with the big players in their industries and take advantage of products which are now affordable and specifically designed for SMEs to help understand invoices better.

The tide is turning

The good news is this looks like it is beginning to happen – TechNavio forecasts the global SME big data market will grow at a compound annual growth rate (CAGR) of 43 per cent over the period 2013-2018. SMEs are starting to enjoy using the tools that were previously only available to larger corporates.

We’ve started recently to extend our analytics offering to include accounts receivable dashboards. Analytics Accounts Receivable has been designed to allow businesses to obtain an immediate overview of their invoice performance, tracking invoice progression in near real time all the way through to final payment. It builds on our analytics product for accounts payable and will enable companies, of all sizes, to turn data into actionable insight.

We know that this is something that SMEs are longing for – when asked, 65 per cent of firms said that they would see value in gaining more insights into their invoices. Advanced analytics tools are enabling enterprises to gain deeper insights into their business, which can help them improve processes and efficiency. They can see where the money is tied up and this in turn puts the power back into their hands. They gain detailed insight into their business financials and have full visibility of their supply chain.

Through this new technology, SMEs can obtain a high level look at how Accounts Receivables are progressing, including spend by customer and country, and trends by month based on volume and value as well as seeing whether the correct tax rate has been paid for their invoices, including a breakdown by country to monitor cross-border discrepancies. Firms can use the software to build and download customisable, detailed invoice reports, helping them to track their invoices at the most granular level. This is something that would have previously seemed out of reach for many SMEs.

Supplier analytics tools are creating a level playing field for SMEs. There is a real appetite for this sort of detailed, ready-made and real-time insight which ultimately helps businesses stay globally competitive, efficient and profitable. In today’s tough economic climate, business leaders need knowledge that leads to real actionable insight and the power to survive late payment hiccups and unpredictable cash flow. Thanks to advanced data analysis techniques and AI, the technology exists to make this intelligence available to suppliers, no matter how small. The time has come for firms of all sizes to embrace innovative data analysis technology and make sure they don’t become outdated in a world that is digitising.

Andrew Nichols is head of analytics and procurement at Tungsten Network

Further reading on cash flow management

Ben Lobel

Ben Lobel

Ben Lobel was the editor of from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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