Cash flow is the lifeblood of any wholesale business. Positive cash flow enables you to run your business efficiently, pay your expenses, match client expectations, and reinvest in your company for growth. So, knowing that cash is king, how can you better manage it?
While it is true that all businesses must maintain their cash flow positively and avoid running out of money at inconvenient times, excellent cash flow management is key to wholesalers’ profitability and effectiveness as a business. As a B2B business, the time lag between paying for items from local or international suppliers and receiving payment after delivery to your clients is usually measured in months. Bridging this gap is thus a vital business finance issue.
Most Common Reasons for Cash Flow Issues in Wholesale Businesses
- Sales fluctuate seasonally
- Failure to send out invoices and collect client payments on time
- Overstocking and low-profit margins
- Growing too rapidly and putting a strain on short-term funding
- A financial facility that does not adapt to the changing demands of the firm
- Inadequate financial planning
- Disorganized method of spending
- Rent and utilities – high overheads
- Bad debts
- Inadequate credit control and credit checks
How Do You Solve Cash Flow Problems?
Although cash flow is a vital aspect of any business, cash flow techniques should differ based on whether you run a wholesale or retail business. Some cash flow management strategies that wholesalers should employ may not necessarily apply to a retail setting and vice versa.
Here are some of the most critical cash flow management challenges for businesses and how to deal with them as a wholesaler.
Accounts Receivables
Sales and timely client payments are essential for any business’s cash flow, and irregularities in earnings can rapidly lead to cash flow problems.
Wholesalers usually sell on credit, which implies that some payment for products is deferred later, causing cash inflow to be delayed. In this case, combining wholesale business operations into a single system and managing accounts receivable at one place with the help of BFM, helps enhance cash flows and optimize your payment cycle.
Poor Cash flow Visibility
Business owners often lack the knowledge or latest updates on the cash flow scenario due to poor cash flow visibility. The time lag in making the payments to suppliers and getting paid from customers after product delivery usually ranges from 60-180 days and real-time receivables and payables tracking is not a common practice.
Bridge the gap with BFM’s 360-degree cash flow visibility. Get all receipts, payments, sales, purchases, receivables and payables in a single dashboard. Keep track of upcoming vendor and supplier payments and ensure a positive cash flow throughout.
Invoice Generation and Delivery Management
Prompt invoicing and delivery are essential not only for cash flow management but also for customer satisfaction. Delivery delays can lead to incorrect cash flow statements and reporting, as well as a negative customer experience.
With BFM’s automated payment reminders, wholesalers can cut-short the time lag between invoice generation and payments received. BFM accelerates payment collection up to 20%.
Discover more about how BFM can help wholesale businesses achieve growth faster.