Akshan Sharma of ProcureDesk explains why growing companies can't see their cash outflows coming. Most don't track open purchase orders or negotiate vendor payment terms, leaving them blindsided by invoices. A structured PO process with net-30/60 terms lets you forecast next month's spending and align payables with receivables.
You just created your cash flow statement, everything looks good, and the next day you see three surprise invoices and everything goes for a task. If that is you, this video is for you. So in this video I'm going to talk about how growing companies struggle with cash flow visibility because they don't have the right processes in place to understand what is coming and how to actually fix it. If you're joining me for the first time, welcome. My name is Akshan Sharma. I'm the founder of procuredesk, which is we help growing companies automate their procurement and AP processes. So let's jump right in. So problem number one is you don't know what is already committed. Here's the reality of most growing companies. They do not have a upfront process to capture what is required to run the operation. Let's say you are running a construction company and you have four men at the job site ordering materials. So they go call the vendor, order the material and you're just waiting for the invoice to show up so you can plan your cash flow. So the commitment actually happened maybe two weeks back when they ordered the product. You just don't know it. And if you do not have a upfront process to capture the requirement of what they're going to buy, you always have surprise expenses or surprise invoices which cause problem with cash flow visibility. Right. Number two is you need to look at your open purchase orders to understand what you need to plan for. So for example, if you have a purchase order that is issued to the vendor, but it is not received yet, you know you don't need to pay for that. You could probably start looking at specific dates. So when that is scheduled to be delivered, you can use data like that to plan better from a cash flow standpoint. Right. Or you might want to say what is received but not invoice yet. So you need to accrue for things like that. Right. These are the things you start looking at is when you have a purchase order approval process or have a peer process in place. Number three is timing matters to understand when somebody needs to pay. So with surprise expenses, what we typically see is you do not have negotiated terms with the vendors. Everybody might give you like 15 days, 30 days or it just due now. Right. Because it's a critical purchase and so on. So now imagine a scenario where you have a purchase order process and the terms are negotiated with the vendors. So you know when the invoice comes in you have probably net 30 or net 60 terms. So you can start looking at your cash flow in a much better way. And guess what? Now we can use this process also to extend the payment terms to make sure you are, you know, better managing your cash flow and tying it with your AR versus AP trying to close that gap, right? So if you have cash flow visibility problems, you're probably dealing with, you know, number one, you don't know what is committed. Number two, you do not have maybe an open order report which you can look at and say what is invoice, what is yet to be invoiced, what is received and so on. And third is you probably don't have set up, you know, different terms with the vendor so you can start looking at those terms and paying by the terms. Right. If you're struggling with any of these issues and you want better cash flow visibility, click on the link below and schedule some time with one of our product specialists so that they can walk you through how a system can help you increase cash flow visibility. Now thanks for joining me today and I'll see you in the next video.
