Cash flow is the flow of money in and out of a business, and keeping track of it is essential to building a sustainable and successful business model. Stocking companies, such as D2C brands, e-retailers and wholesalers, face unique challenges related to cash flow because of the nature of their business model. Here are some examples:
- Start-up costs: setting up an e-commerce business or brand can be costly, with expenses such as website development, e-commerce systems, marketing, inventory management systems, etc. Often it takes time for the business to start generating revenue, and in the meantime these costs hit cash flow. To deal with this, it may be worth considering a loan from Almi, for example, and a bank overdraft.
- Seasonal activities: in many activities, revenues are affected by seasonal demand. An obvious example is winter clothing, which has a majority of its sales in the fourth quarter. To prepare for such fluctuations, it is wise to ensure good liquidity. It may also be a good idea to use a service such as Waylog so that inventory costs can be deferred.
- Long payment cycles: compared to physical shops, where payment is normally made directly at the checkout, many online sellers find that payment cycles are longer. This is because many customers pay by credit or instalment, e.g. via Klarna, and these can take time to process. At the same time, consumers today expect such payment options to be available. One way to minimise the impact on cash flow is to negotiate better payment terms with suppliers and retailers.
- Optimize inventory: having the right level of goods in stock is important for any warehousing company. Purchasing inventory can also be a major challenge for cash flow. To ensure the best possible levels, an inventory management system (often called a WMS, Warehouse Management System) can be used to analyse stock levels and optimise order flow. On the one hand, most people want to tie up as little capital as possible in inventory, and on the other hand to make sure they don't run out of the big sellers. Check out Madden Analytics or Ongoing WMS, for example.
In summary, all companies with inventories face challenges in optimising cash flow. Setting up financing strategies, preparing for seasonality, negotiating better terms and optimising inventory can effectively manage cash flow and ensure the business model is sustainable over time.
With Waylog, you can improve cash flow by getting 120 days of credit on your supplier invoices. Waylog today helps companies like:
- Distributors 👝📠
- Clothing brands 🩳🩱
- Pet food companies 🐶🍖
- Interior design companies 🖼️🎨
- Jewellery & watches brands ⌚️💍
- Skin care and cosmetics 🧴💄
- Importer of beverages, electronics and coffee ☕️🍾📀
Contact us and we will tell you more.
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