Are you cash flow ready?
‘Tis the season to be jolly to your customers. Why? The busy season is coming, with ‘Black Friday’ not so long ago, the Festive Season and New Year are hot on its heels. Australian shoppers are anticipating that special deals will be available from as early as today and businesses should be prepared. Although, this is probably easier for larger businesses to accommodate, smaller businesses could find it difficult to compete. This is where prior planning comes in handy, which allows business owners to have the strategies and tactics to manage the upcoming busy periods.
All wholesalers or retailers should have or should be planning on how they can increase sales this busy season. What areas should a wholesale or retail business plan for? In this article, we highlight a few points to consider, from areas such as
- Cash on hand
- Managing stock
- Staffing
Let’s start with cash on hand because cash is what keeps businesses alive. Here are some key points to consider:
- Look at credit terms of payment, see how you can reduce the cash flow gap by grasping onto early payment incentives or payment plans that can assist with your weekly cash flow
- If you’re a wholesaler waiting on payments from retailers, a solution is SME Cash Invoice Finance (turnover more than $2M) or Business Line of Credit (turnover between $150K to $2M).This is where you can borrow up to 90% of receivables outstanding against those receivable invoices.
- If you’re a retailer, look at ways to increase stock turnover for example free gift wrap service or extended business hours.
Managing stock is another area to consider. When stock is turning around in your business, keep in mind some of these points:
- Ensure to have 4-6 weeks of stock available on your shelf. Order based on your inventory cycle, which allows you to benefit by having stock available on your shelf. This reflects your ability to understand your stock turns.
- On a bulk order, a discount is provided if paid in full. You can make full use of the discount with a cash injection via an Inventory Loan from SME Cash. Sometimes a loan is an opportunity to get the stock sooner and at a discount, then turn that stock into cash to help your business grow.
A common resource across all businesses who look to grow is ‘people’. During the busy periods, staffing will be an important consideration which could include managing some of the following (the points below won’t apply to all businesses):
- How will you reward staff based on sales they get during the festive season? Other than having festive specials or extended hours, there may be other incentives such as ‘With Any Purchase’ competitions. A prize at the end of the festive season OR it might be the general if you get ‘X’ sales you will be rewarded with ‘Y’. This could incentivize staff to sell more, which would help your business increase sales.
- With the busy period coming along, managing the balance between staffing hours and business activities is key with the underlying busyness that comes with the festive season. The opportunity here is to hire casual staff, which would allow flexible staffing hours for your current employees. Of course, hiring extra staff means needing the cash NOW, and you can add a small Business Loan from to your Inventory Loan from SME Cash and see your business grow.
It’s important to stay on top of your cashflow this busy season. Black Friday has finished and hopefully all is planned for the upcoming Festive Season.
In a quick summary
1. Managing Cash
a) Wholesalers: Collect your receivables sooner or consider an Invoice Finance or Business Line Of Credit with SME Cash
b) Retailers: Create some quick deals to turnaround stock fast
2. Manage Stock
a) Retailers
i) Stock your shelves with 4-6 weeks of inventory
ii) Take advantage of discounts on bulk purchases by using an Inventory Loan from SME Cash.
3. Staffing
a) Consider a reward-based approach for your staff during the busy season to keep sales high
b) Hire casual staff for the busy season. Of course, you will need to inject cash into your business prior, which is possible by adding a Business Loan with your Inventory Loan from SME Cash.
As the saying goes ‘Prior Proper Planning Prevents Poor Performance’
References:
- https://www.dhirubhai.net/pulse/smoothing-ripples-sme-cash-flows-part-2-don-cunnington/
- ‘Stock On The Shelf’ written by Jennet Cunnington, SPA+CLINIC Magazine, Volume 79, October 2019
Researched and written by Eijaaz Charania