In my last post, How Small Business Can Survive The Recession With Business Intelligence, I talked about how small companies, in general, can utilize business intelligence tools to help streamline their business and cut costs.

I know I was a little sparse on the details.

Fortunately we’re starting to see more bloggers, such as Ken Kaufman at the CFOWise blog, explaining the basic indicators that small businesses should measure in order to be successful.

I too will go into details here as to what immediate concrete steps YOU can take if you’re a small retailer, manufacturer or wholesaler, to tune-up your business during the recession using Business Intelligence tools.

Improving Cashflow

This is composed of several variables such as sales, cost of sales, expenses, invoices, inventory, suppliers, investments and finance costs.

Each one of these variables needs an objective. What I’m going to focus on today are two very important variables that can affect cashflow: collections and inventory.

1. Improve collections

For example, to measure outstanding invoices, you have to track the days outstanding as an indicator. If you give your clients Net 30 payment terms, and your measurements show they take 60 days to pay you, then you’ve discovered a problem.

If your customers take 30 days more to pay you, that’s the equivalent of a month’s sales.

That’s money that’s in your customers’ bank accounts and not yours.

Now you’re armed with the data  necessary to take creative meaures to improve collections.

2. Reduce inventory

We can either measure the value of inventory or inventory days. Inventory days is a better measure, in my opinion, because it tells us how many days a piece of inventory stays in our warehouse before it’s sold.

If you order 30 days worth of inventory, enough to service your customers, but that inventory stays with you for 60 days, that’s 50% of the value of your inventory in your warehouse and not in your bank account.

Again, Business Intelligence to the rescue. Providing you with this knowledge allows you to take measures to reduce inventory, another cashflow improvement measure you can take.

Where Does The Data Come From?

If you use an ERP system such as SAP Business One, Microsoft Dynamics Nav or Solomon, JD Edwards, AccountMate, or Quickbooks, you can move that data in near real-time into your Business Intelligence tool using an ETL tool.

Most of these systems provide some kind of reporting system, but a Business Intelligence tool that is well designed is typically easier to use, provides you with much more information, and allows you to drill down into specific details by a simple point-and-click.

Gone are the days when Business Intelligence tools were expensive, unwieldy enterprise applications that took forever to install and customize. Thanks to the sunny outlook for cloud computing, Software-as-a-service Business Intelligence tools can provide instant value that connects in real-time to your current systems.

What do you think? What are other areas we can measure and take action with today to save your business during tough times using Business Intelligence?

Please comment below or contact me with specific questions.

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