ADS Solutions Wholesale Distribution Software Blog

Can Small Business Inventory Software Improve Warehouse Productivity?

Here’s a statement with which you’ll probably agree: any small company aspiring to grow that offers a product benefits from the use of distribution software for small businesses

However, if you think that the benefit of inventory management software to your small business is merely that it makes stock easier to track, you’re only half right. The secondary benefit of small business inventory software is to make your team and warehouse operations more productive. 

Start by Understanding Where Productivity is Lost 

Before you attempt to change anything about your warehouse operation (including adding or updating your small business distribution software package), be sure you understand where you might currently be losing productivity. 

In Steve Banker’s Logistics Viewpoints article, “Improving Productivity in the Warehouse,” he offers 5 hotpoints that might be slowing your warehouse operations down:

  • Warehouse design: layout, working conditions, technology
  • Defects: product, packaging, and material handling design
  • Planning/scheduling: labor, slotting, waving, inbound/outbound
  • Management: supervision, training, coaching
  • Employees: performance, absenteeism, training 

Weaknesses in any of these areas will negatively affect your warehouse operations, regardless of your inventory tracking system. Having poorly trained employees, weak planning and scheduling strategies, an ineffective warehouse layout, and more can negate the positive effect of your small business distribution software. 

But that’s great news, because most of these pitfalls are easy to fix, and are inexpensive enough to allow you to concentrate your financial resources on current technology: buy the best and most current small business inventory software that you can afford.

Know How to Improve Your Warehouse Productivity 

It’s interesting to examine the results of the former “Logistics Management’s 6th Annual Warehouse and Distribution Center (DC) Operations Survey”: 

To lower operating costs, over 75 percent of respondents planned to improve warehousing processes, 60 percent targeted inventory control, while nearly half planned to changed racks as well as their layouts. 

What are your small business’ improvement plans?

Norm Saenz, senior vice president and principal of TranSystems, a supply-chain consulting firm and research partner for this survey, “cautions against being too conservative with investment inside your four walls.” Your warehousing practices and inventory control strategies are your biggest assets, second only to your ability to optimize your product line and leveraging modern inventory management software specially designed for small businesses to help you buy smart and price as aggressively as possible.

If you want to keep your inventory visible and on the move, you need the right technology to automate inventory functions and processes. That’s where we come in. We can help your growing wholesale distribution business improve productivity using the right distribution software for small business. Contact us today to request a demo.


Tightening Up Accounts Receivable

While many sales managers measure their success on the amount of sales they make, companies don’t actually make any money until they have it in their hand. Until then, they could be in financial trouble. On the surface, it might seem like your business is on the right track when revenues exceed expenses. But in reality, businesses thrive when the cash they receive exceeds liabilities and expenses paid. That revenue has to convert to cash on hand. Since businesses often fail when they run out of cash, and since some sales cycles make it difficult to boost sales at certain points during the year, it is imperative for your company to tighten up its accounts receivable practices to sustain a position of financial stability even during times when sales are sluggish.

There Are Many Reasons Why Tightening Up Your A/R Practices Can Help

  1. Reduced risk for write-offs.
  2. Reduced risk of commission charge-backs.
  3. Improved liquidity. If you’re not a bank, then don’t act like one. Keeping liquidity strong helps your credit line balance. That frees up cash for new purchases.
  4. Better operational procedures. If all customer information is available in your distribution management software system, all employees can access accounts, solve problems, be alerted to credit holds, and view customer status instantaneously.

Developing strategies for tightening up accounts receivable is in order. Here are some strategies you might want to consider.

tighten up accounts receiveable

Evaluate Your Accounts Receivable Policy

Sometimes the problem lies with the structure of your accounts receivable policy. When reviewing your current company policy, consider:

  • Requiring larger down payments. This can help you increase working capital.
  • Reducing your terms. For instance, if you offer 90 days, lower it to 60 days; or if it’s 60 days, lower it to 30 days. Did you know that there is an inverse relationship between the age of your receivables and the likelihood of you collecting on them? Statistically speaking, the sooner you collect, the less likely your customers will be to delay payment or request discounts.
  • Tightening credit requirements. One of the biggest questions to ask is, “Who gets credit?” Tell customers about your credit requirements up front and require a personal guarantee. Don’t be afraid to deny credit.
    Being consistent in how you apply your policy. Notify customers of the terms before the sale, extend credit only to those who meet your requirements, and ensure invoices are sent in a timely manner and contain accurate billing information. They may leave for other reasons, but customers generally don’t leave because your require payment according to your stated agreement.

Tightening up your accounts receivable policy can increase the amount of money you collect from your customers.

Check Out Your Collection Effectiveness Index

Companies frequently use days sales outstanding (DSO) – how many days it takes to collect a payment after a sale – to determine how efficient they are at collecting outstanding accounts receivables. The lower the number, the better the turnaround, and the greater chance that company will be successful.

The formula for DSO is:

Accounts Receivable x 365 / Annual Revenue

However, another suggestion is to use the collection effectiveness index (CEI). According to the Credit Management Association (CMA), the CEI is a percentage that…

…expresses the effectiveness of collection efforts over time. An index closer to 100 percent, indicates a more effective collection effort. Remember, it is a measure of the quality of collection of receivables, not of time.

Focus on Closing Overdue Accounts

The longer an account stays open, the longer you have to worry about it. Instead, consider closing all accounts that are 60 days past due.

Additionally, involve your sales staff. Sales teams have special relationships with your customers and rely on their sales to make a living. Therefore, they are motivated to collect payments. Otherwise, don’t pay commissions on outside sales that are unpaid after 90 days.

Finally, consider updating your accounts receivable management software. An ineffective system can slow the process and fail to provide the information you need to improve your cash flow. Using a manual billing process can mean dealing with challenges such as extra handling costs and errors in manual data entry.

ADS wholesale distribution software is a complete ERP distribution management software package. Contact us today to find out more.