Cash flow is the flow of money in and out of a business, and keeping track of it is important for building a sustainable and successful business model. Inventory-holding companies, such as D2C brands, e-commerce businesses and wholesalers, face unique challenges related to cash flow due to the nature of their business model. Here are some examples:
- Start-up costs: Starting an e-commerce business or brand can be costly, with expenses for things like 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 impact cash flow. To manage this, it may be worth considering a loan from, for example, Almi and an overdraft facility from your bank.
- Seasonal business: In many businesses, 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 variations, it is wise to ensure good liquidity. It may also be a good idea to use a service like Waylog so that the costs of inventory can be deferred.
- Long payment cycles: Compared to physical stores that normally get paid directly at the checkout, many who sell online experience longer payment cycles. This is because many customers pay with credit or installments, for example via Klarna, and it can take time for these to be processed. At the same time, consumers today expect such payment options to be available. One way to minimize the impact on cash flow is to negotiate better payment terms with suppliers and resellers.
- Optimize inventory: Having the right level of goods in stock is important for all inventory-holding companies. Purchasing inventory can also be a major challenge for cash flow. To ensure the best possible levels, you can use an inventory management system (often called WMS, Warehouse Management System) that analyzes inventory levels and optimizes the order flow. On the one hand, most want to tie up as little capital in the inventory as possible, and on the other hand, be sure not to run out of bestsellers. Check out, for example, Madden Analytics or Ongoing WMS.
In summary, all companies that have an inventory face challenges when it comes to optimizing cash flow. By setting up financing strategies, preparing for seasonal variations, negotiating better terms and optimizing inventory, you can effectively manage cash flow and ensure that the business model is sustainable over time.
With the help of Waylog, you can improve cash flow by getting 120 days of credit on your supplier invoices. Waylog currently helps companies like:
- Distributors 👝📠
- Clothing brands 🩳🩱
- Pet food companies 🐶🍖
- Interior design companies 🖼️🎨
- Jewellery & watches brands ⌚️💍
- Skincare and cosmetics 🧴💄
- Importer of beverages, electronics and coffee ☕️🍾📀
Contact us and we will tell you more.
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