Why it's important to keep an eye on cash flow

Cash flow is the heart of the business

Keeping track of cash flow - the money that flows in and out of the company over a period of time - is important for the company's growth and to avoid sudden liquidity problems. It's also a good tool for knowing when it's the right time to buy inventory. As an e-tailer or wholesaler, you don't want to buy too much or too little inventory in order to get the best possible results. Timing is important - by analysing your cash flow, it's easier to know when it's time to place an order for Black Friday or Christmas, for example. 

Cash flow can be a problem even if business is good

It is easy to think that cash flow is not a problem if the business is doing well. However, the reality is not always so simple. If your business is growing by double-digit percentages every year, you need to invest more and more in inventory and other items. Cash flow can't keep up. A bank overdraft can be one way of dealing with unforeseen costs, but it's often not enough. 

Ensure that cash flow does not become an obstacle to growth

In 2020, imports and exports worth SEK 1.5 trillion were reported to have failed due to a lack of financing in some form. Anyone who owns and operates an e-commerce business knows how painful it can be to not have a top seller in stock. That's why it's good to be prepared if the need arises. 

An alternative is a bank overdraft. Bear in mind that it comes with a fixed fee on the entire space each year whether it is used or not, so it is wise that the credit line is not too high. The fee is typically 0.5-1.5% per year. On top of that, there's an interest charge on the amount used. 

If the company is a fast-growing e-retailer, wholesaler or D2C, another alternative (or complement) to the overdraft facility is supplier financing with Waylog. The way it works is that the company sends the supplier invoices that it wants to pay later to Waylog, Waylog pays the supplier and the company pays Waylog up to 120 days later. This way, you can get the goods home and sell them before they are due.

Having access to a limit and Waylog's platform is free of charge, so if the need arises, you are prepared without the company incurring fixed costs. The company only pays a fixed monthly fee on the amount used. Is it interesting for your business? Get in touch and we'll tell you more.