Business success is always the outcome of an enterprise’s ability to manage its finances efficiently. For a logistics service provider (LSP), a watchful eye on the financial flows of the company can generate much-needed cash in-flow and improved ROI. A sound financial management module that creates a centralized robust financial information system can stimulate growth by enabling enterprise-wide control and helps in reducing costs. At the same time, a good operations module built on a freight platform helps to improve productivity and efficiency and results in revenue growth. But, integrating finance with operations using comprehensive logistics ERP software allows LSPs to gain immense benefits to improve both Operations & Finance.
Why is there a need to integrate Finance with Operation?
This is why:
- Access to relevant financial information allows operations to invest in processes with the highest ROI
- Financial results can be used to set & measure performance benchmarks for various operations departments
- Financial managers can have more accuracy in predicting financial performance
- Accurate financial predictions allow effective planning with no surplus or shortage of resources
- Senior management can have a clearer view and a greater degree of control
Let’s understand how the amalgamation of these two crucial business functions can turn into a huge advantage for your organization.
A) Drive & Manage Growth – To reap optimum benefits, the integration between finance and operations must be two-way. The finance team can use operational information to increase the accuracy and predictability of financial results. Operational managers can utilize financial information to optimize their processes and make effective decisions. Closely working teams from finance and operations can understand the effect of their decisions on each other. This greatly helps to optimize overall results for the benefit of the entire organization instead of any specific departments.
B) Scheduling of Invoices & Outstanding Statements – When there are gaps in finance and operations, unnecessary delays occur while generating invoices for services consumed by customers. Such delays result in unpredictable cash flows. Advanced features like the automatic dispatch of daily or weekly outstanding statements to customers, and an online view of invoices enables freight forwarders not only help to improve their relationship with customers but their cash flows while reducing working capital requirements.
C) Controlling Costs – A comprehensive financial module of freight forwarding software, when tightly integrated with operations, enables all provisional and final receivables & payables to be directly posted. This results in Zero Revenue leakage and a reduction in operational costs. Certain features like an approval system help manage finances much more accurately and reduce the chances of errors and frauds. The integration of finance with operation also provides enterprise-wide optimization of finance which uses crucial information acquired from operations to regulate the credit limits of customers, and improve cash flow and revenue realization. An end-to-end logistics software can help LSPs to control, manage and monitor the performance of individual cost centers/branches. The regulatory compliances are simplified using automated Tax Management features.
D) Better Strategic Planning and Analysis – What major financial events do we anticipate in the coming year? How will emerging market conditions impact our business? What can we expect from a financial perspective if we acquire a smaller company or add a new line of business to our portfolio?
The ability to accurately answer questions like these is crucial to effective corporate planning. Freight forwarding software with a capable financial management module builds the foundation for successful business strategies by allowing financial executives to forecast future events, create and assess “what if” scenarios, identify new business opportunities, and analyze the potential for vital market trends and internal events.
E) Improved Decision Making – Right decisions made at right time can ingeniously improve important factors like profitability, productivity, and customer satisfaction. By closely integrating financial accounting with Sales & Operations, LSPs can improve decision-making. Information flow between these departments empowers the managers to make informed decisions.
If carefully managed, the integration of finance and operations with logistics can work wonders for logistics and freight forwarding companies. Effective use of Logistics ERP software for this unification can help your organization reach newer heights. From improvement in profitability to growth in customer satisfaction, the possibilities are endless.
Originally Published in Portcalls Asia Magazine
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