6 Ways Wholesaler Businesses can free up Cash Flow
As a wholesaler, having cash available is crucial in order to keep buying. Without the ability to purchase, stock levels fall, customer orders are delayed and you can't invoice for undelivered services.
That's why a good cash flow management strategy that’s tailored to your business needs is essential. No matter how well sales are going, if there's no cash available to spend, your business grinds to a halt.
For Australian wholesalers, a long supply chain makes cash flow even more difficult to manage. With so much stock coming in from overseas, there are shipping and customs delays to contend with before it even reaches the wholesaler warehouse. Payments in different currencies can take several days to transfer and time zones make chasing contacts tricky.
Combine international delays with the time it takes to deliver orders within Australia and wholesalers have a challenge on their hands. It could be weeks between paying out for goods and being able to send an invoice.
Here are six ways to free up cash flow in your wholesaler business.
1. Make it easy for customers to settle their bills
You can't force customers to pay on time, but you can make it easy for them. Don't limit the number of ways clients can transfer what they owe, or enforce a system they're unlikely to use for anything else. People are busy, and logging into a new and unfamiliar software takes time and effort.
2. Optimise your invoicing schedule
Prompt invoicing encourages faster payment. Waiting months after the event to send a request for payment means you've probably already fallen to the bottom of the pile.
Your cash flow depends on regular payments coming in, and if you don't invoice on a regular basis, you won't get paid on a regular basis either. One way to manage a lengthy invoicing process is to automate regular accounts, using software that generates and emails invoices at set intervals.
3. Lease your assets
Assuming business is good, your cash flow problems are likely to be short term issues. One way to free up some cash is by looking at what's tied up in your assets. Company cars, for example, are a necessary but expensive operation.
However, by selling them to a professional finance provider, they'll lease them back to you for smaller monthly repayments, meaning you have the bulk of the value available to invest or tide you over between payments.
4. Shorten your business cycle
It's often a long time between agreeing a sale and getting paid that causes cash flow problems. In between times, you may have to order or manufacture the product, arrange distribution and create the invoice.
Finding ways to cut down the time involved aligns your sales figures with actual cash in bank. Consider shortening your payment terms, providing a discount for those who pay early and looking at options offered by your creditors as well.
Another way of managing sales and cash flow is to have plenty of the products you know sell quickly, but not overstock other items. Seasonal goods should only be in your warehouse during relevant sales periods so your profit isn’t stuck in the warehouse for months at a time.
5. Offer Vendor Finance
Offering vendor finance means your customers can be confident in continuing to buy from you even when they can't afford a lump sum payment. Offering them the opportunity to pay by installments means you guarantee regular income from them to keep your cash flow going and make your company easier to work with than your competitors.
You could also provide little extras, like wrapping up a leasing or servicing arrangement into your offer - paid for via smaller, manageable payments.
6. Bridge the gap with Debtor Finance
Keep your business afloat when your customers aren't paying on time by receiving cash inflow from a professional debtor finance provider. Cash flow is so essential to a successful business that paying a small fee to guarantee you have money available is often the easiest way to manage your accounts.
Without money in the bank, you can't pay staff, take advantage of sale prices or invest in new opportunities - all essential components of a wholesale business. With finance, your company continues growing even when waiting for customer payments.
Debtor and Trade Finance with Classic Funding Group
Our debtor finance solutions help businesses turn their unpaid invoices into cash. Whether to pay your own bills, invest in business growth or simply to improve operations, our financing service could be the answer to your cash flow woes. We even have a simple online portal to help you manage your account.
Get in touch today for a confidential conversation.