Cash flow accounts for all the incomings and outgoings of a business. Unlike profit, cash flow represents the amount of money that is available to a business at any given time. Keeping cash flow at an optimal level is important because it allows businesses to pay the bills, invest back into the business, meet customer demand, and provide a positive customer experience.
Forecast sales and cash flow, budget better and monitor sales performance
Although cash flow is a critical aspect of any business, cash flow strategies should differ depending on whether you’re running a wholesale business or retail business. Some of the cash flow management approaches wholesalers should take don’t always translate to a retail environment, and vice versa.
Here are some of the key cash flow management considerations for businesses, and how to tackle them as a wholesaler or retailer.
It goes without saying that sales and prompt customer payments are important for any business cash flow, and that profit inconsistencies can lead to cash flow problems quickly.
Wholesalers often sell on account, which means partial payment for goods or services is deferred until a later date – delaying cash flow. In this case, wholesale cash flow can be improved by integrating wholesale business processes into a single system and utilizing a dedicated B2B payment gateway such as TradeGecko Payments. This not only allows you to optimize your payment workflow but also offers customers a convenient way to pay invoices on time, every time.
For retailers, cash flow is usually tied more directly to revenue, so peaks and troughs in sales can impact cash flow. In this instance, offering customers the ability to pre-order popular items and buy product bundles (maximizing order values) as well as enabling backordering can help give you access to a steadier stream of cash.
For wholesalers, managing cash flow through territory management is all about making sure that your sales reps are putting the right amount of time into nurturing the right accounts. However, many wholesale distributors neglect to effectively segment customers, track sales performance, and improve sales prospecting strategies. Setting sales goals and monitoring KPIs is integral in discovering areas of strength and weakness, and optimizing territory management by sales teams.
Retailers typically don’t have this problem because the retail model involves selling directly to all consumers at a standard price, meaning you don’t have to spend resources on each potential customer. However, it’s still critical to set sales goals and track key metrics using sales reporting because, as we’ve discussed above, cash flow for retailers is closely tied to revenues.
Prompt invoicing and delivery are not only important for managing cash flow but also keeping customers happy. Delayed fulfillment can result in inaccurate cash flow statements and reporting, as well as a poor customer experience.
Slow invoicing and delivery processing is common for wholesalers as both tend to require manual work. This has a ripple effect because staff and warehouse space to store stock awaiting delivery are expensive and eat into cash and revenues. Utilizing wholesale inventory management software like TradeGecko can reduce processing times by automating the fulfillment workflow and cutting down on expenses.
Thankfully, for retailers, the invoice creation and delivery processes should happen automatically when orders are placed on your eCommerce platform. However, if you’re struggling to process orders efficiently, consider integrating your eCommerce solution with TradeGecko so that you can automatically sync sales with stock levels, invoices, and order fulfillment processes.
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