Any business needs good cashflow to prosper because cashflow provides the funds necessary to pay bills, cover operating expenses, purchase inventory stock, pay employee wages, provide positive customer experiences and to invest back into the business.
Cashflow represents the money available at any given time to keep a business running. It accounts for all the incomings and outgoings of the business which means it is just as important for manufacturers, wholesalers and retailers to manage their business expenses as it is to manage sales and inventory stock.
Although cashflow is a critical aspect of any business, strategies to improve cashflow will differ between manufacturing, wholesale and retail business environments. The following five strategies to improve cashflow can be applied to different business types.
Sales and accounts
Product sales and accounts receivable are fundamental to the cashflow of any business and if sales are slow or payments not received in a timely manner this can quickly lead to cashflow problems.
Manufacturers and wholesalers will often sell on account, which means part payment of goods or services is deferred until a later date, reducing cashflow. Wholesalers can improve cashflow by integrating business processes into a single B2B dedicated software system. Allowing them to optimise payment workflows and offers customers a convenient way to pay invoices on time.
Cashflow for retailers is generally linked more directly to revenue, so seasonal demand and sales variability can impact cashflow. Retails can offer customers the chance to pre-order popular items, offer product bundles to maximise order values or enable backorders to ensure a steadier cashflow stream.
Stay on top of customer invoicing. The quicker you send invoices out, the faster the cash is likely to come in. Implement cloud-based software and applications that present timely, automated invoice creations. Make sure those apps are integrated seamlessly.
These systems offer tailored solutions to manufacturers, wholesaler and retailers, providing great invoice and accounting capabilities to optimise invoice processing and ultimately increase cashflow.
For wholesale businesses, however, it can be common for invoice and delivery processing to be slow because of the manual handling aspect of the tasks. Accounting systems can be integrated with inventory management software that reduces processing times by automating the fulfilment workflow and cutting down on storage and staffing expenses associated with delays.
Businesses can also encourage early payments by offering a discount to customers who pay by a certain date. Equally, you can charge a late payment penalty to prompt timely payments however you must be upfront with late payment penalties. This information such as when and how much will be charged can be included as part of the terms and conditions section on your invoice.
Streamline business processes
An important and sometimes overlooked aspect of cashflow management is ensuring your business is operating as efficiently as possible. Remember, cashflow is not just about increasing cash into the business but also reducing the cash going out.
Focus on cutting down on time spent performing tasks, not just costs. Carefully consider and analyse all current business processes and current expenses. How efficient are the processes and are there areas where improvements can be made? What are your current expenses and how can these be reduced?
Manufacturers should evaluate assembly process times and consider just-in-time inventory options. They may also benefit from integrating both accounting and inventory control activities into a single automated system to optimise operations.
Wholesalers can adopt accounting software to speed up and automate invoicing, or to optimise inventory control by implementing cloud-based systems that reduce manual handling and improve order fulfilment.
As a retailer you need enough staff to service customers, but over-staffing can quickly cut into the budget, reducing cashflow. Retailers should address employee levels and ensure staffing rosters are in sync with customarily peak or slow sales periods.
Not only should you look to reduce current costs but by utilising time-saving software solutions you can operate more efficiently, do more and reduce wages to help effectively manage cashflow and expenses.
Implement smarter inventory control
Any business whether retail, wholesale or manufacturing will benefit from effective inventory control to increase your company’s productivity and improve cashflow.
Replacing time-consuming manual processes with cloud-based automation really will help manufacturers to gain better efficiency and productivity. Additionally, cloud software will enable manufacturers to measure the true cost of a product from raw materials to shipped product.
For many retailers, much of their capital can be tied up in inventory stock which is why the most important thing to improve cashflow is to ensure the right products are being stocked, in the right quantities and available at the right time to ensure a healthy profit. Here’s a quick refresher on how you achieve that.
Expand your market
Develop a new marketing strategy to identify ways to expand or increase your market either through product development, new product offerings or expanding into new markets and channels.
Manufacturers may look at adding products or services while retailers could consider multichannel eCommerce channels to attract a larger customer base. Larger markets and more customers can be a good way to bring greater cashflow into your business.Topics: business challenges, inventory management, inventory management software, multichannel