How Automated Metrics can help you successfully manage cash flow in your Dealership.

Cashflow is more important than ever. Heres how automated metrics can help you keep closer tabs on your finances.

The COVID 19 crisis is placing a strain on the economy the like of which even the most experienced economists have never seen. At such a time, it has never been more important for automotive companies to keep an eye on their cashflow.

Having a clear understanding of what’s coming in, what’s going out and your true financial position could be the difference between success or failure. 

For that, you should embrace the concept of automated metrics.

cash flow with automated metrics

How managing liquidity with Automatedmetrics will help you stay ahead?

Maintaining positive cash flow relies on two things: organisation and planning. If your systems are well organised and your plans robust, you’ll be able to optimise operational costs and make accurate forecasts for the future.

It’s easy to say but difficult to achieve, especially in a business such as car dealerships in which huge amounts of capital are tied up in investments and rapidly depreciating assets.

The overall aim will be to increase the amount of liquidity you have available. This is crucial. It will enable you to make short term investments and, even more importantly, cover expenses to keep the engines of your business running.  

Successfully managing liquidity creates a virtuous circle. Not only will your business be safe and everyone will be paid on time, but you’ll have money on hand to make investments and embrace opportunities which could lead to more profits which in turn improves liquidity and helps you invest for even more growth.

The key to maintaining liquidity lies in your data. It will help you understand your cash position, see what invoices are due, which need to be chased up and what expenses are on the horizon.

Businesses which fail to control their data often have an incomplete idea of how much money they have, how much they’re spending and which areas of their business are most profitable.

Live data, then, can be the key to efficient cash flow management. Below we look at some of the key areas it can help in more detail.

1. Inventory management

Inventory management is a delicate balancing act. You want to have the optimum amount of stock available at any one time.

Too little and you could struggle to fulfil orders and leave customers waiting. Too much and you’ll find yourself spending more money on storage and excess stock which is never sold.  

Better data allows you to control inventory at every stage from the way it is sourced to how it is managed, transported and stored.

Throughout this process, you’ll need a better understanding of these key performance indicators.

  1. Inventory turnover ratio
  2. Inventory write-offs 
  3. Holding costs  

In addition to that, you’ll want to consider KPIs such as the average number of days it takes to sell inventory, fulfilment cycle time, average inventory and many others.

Monitoring all these factors from one location in real-time will maximise the efficiency of your inventory management, streamline processes, minimise waste and ensure you know how much stock you need at any one time.

2. Cash management with automated metrics

Real-time cash flow statements give you an accurate and up to date statement of how much cash you have on hand and help you project into the future.

You’ll be able to see problems and take action early to avoid the problem becoming critical. It’s a bit like a ship’s captain plotting a course ahead. The earlier he can see the iceberg the greater his chances of avoiding going full ‘Titanic’.

Unfortunately, many businesses lack decent cash and liquidity management reporting, which hinders their ability to plan ahead and make better decisions in the here and now. It leaves them vulnerable to a cash shortfall which could leave them struggling to meet their liabilities in the short term.  Model various scenarios

Better data makes it easier to make predictions. In other words, automated live data can help you predict the impact of various scenarios on your cash flow.

You can do this by attaining valid and accurate data about your business along with industry benchmarks which helps you forecast how risk may impact your situation.

This starts by measuring your business departments such as the sale of used cars, fleet sales, marketing, after-sales services, financing, network management and corporate financing.

Data will help you understand what the worst-case scenario looks like and develop a strategy which helps you avoid it. Eventually, you’ll be able to measure various cash flow channels, run multiple scenario simulations and make your decisions accordingly.  

3. Gauge the actuals across all dealerships and departments.

It may come as a surprise, but many managers don’t understand the true picture across all departments in their organisation. All too often, departments operate in siloes independently from one another.

This means the people at the top are often working on inaccurate or incomplete data. Automating your data collection helps you see all your information across your business in one place.

This ability to view, analyse and extract information will help your business react more effectively and improve performance. You’ll be able to react to situations before they become more serious and make better decisions.

4. Unify all levels of managers to contribute to a singular purpose. 

Ultimately the aim is to unify the various threads of your business and have them all working towards a single purpose.

Having different sectors of your business pulling in different directions creates waste, which adds to cost and impairs performance. These issues can only be resolved when everyone is working on the same set of live data and pulling in the same direction to resolve the same challenges.

It helps you understand where your business is and where it is going and decide what you need in terms of reinvestment and where you need to make changes. Shedding light on your operations and helping you align your business objectives with your human resource requirements.

It creates a sense of shared responsibility. People are more motivated when they feel involved in meeting business objectives. Better data leads to more transparency and helps show people they are all working towards the same purpose.

5. From red zone to green with automated metrics

Having the next generation software on hand will revolutionise your cash flow management. While common cash flow projections might give you a rough idea of where your business is heading, automated metrics help you see the picture in HD. It helps you optimise operations, cut waste and keep your focus on the future.

If you’d like to find out more about how automated metrics can help you improve your cash flow management, give our team a call today.

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