Cash flow is the lifeblood of the wholesale industry. Without a positive cash flow position, it’s impossible to purchase stock to distribute to your customers. With no inventory to sell, you don’t make any money! It’s that age-old adage that you need to spend money to make money; to provide your customers with goods, you first need to pay suppliers. To pay suppliers, you need to be selling goods. It’s a cycle that, when managed well, is quite profitable. However, there have recently been some significant barriers in the wholesale industry. We discuss some major cash flow issues for wholesalers and offer actionable solutions.
Difficulties Facing Wholesalers:
Disruptions in Supply Chain
The perfect storm of economic events following COVID-19 has seen the ongoing interruption of supply chains. Despite experts predicting supply chains to return to normal by 2023, product shortages and supply chain issues have been an ongoing concern.
Here are some steps to help ensure supply chain risks are mitigated in the future.
1. Find Backup Suppliers
While this is hard to do when there’s a shortage of goods on a global level, it’s always a great idea to have connections to backup suppliers in case your normal supplier experiences any shortages.
2. Prepare for Supply Chain Issues
Transportation disruptions can be devastating for wholesalers. This is why it’s essential to have a contingency plan for when things go wrong. Consider events such as natural disasters, employee strikes, pandemics, and price fluctuations. By creating a plan that addresses alternative solutions for each supply chain disrupting event, you can better prepare for the future. Plan B is generally not the first plan because it’s less efficient or less cost-effective. Ensure you have a plan to access emergency cash in the event you need to implement your backup plan.
High Competition
With big online names such as Amazon now well established in Australia, wholesaling is increasingly becoming a competitive industry. With high competition, the wholesaler with the lowest price often wins the customer. To avoid lowering your margin, try to add value to your customers in ways such as loyalty programs.
Depending on your wholesale products, you may need to be creative when designing a loyalty program. Some popular programs include:
- Travel programs. This is where you provide a group travel opportunity as an incentive for your customers to reach specified volumes.
- Points programs. As your customers shop with you, they build up points to redeem for products or rewards.
- Other types of promotions or prizes linked to a sales target.
By increasing customer loyalty, they won’t be so quick to jump ship purely because your competitor has lower prices. On top of providing quality products, focus on delivering a quality service, and you’ll be sure to see customer retention increase.
Slow Paying Customers
When customers are slow to pay their invoices, it can be difficult for wholesalers to meet other expenses such as rent, employee wages, bills, and purchasing inventory. To keep on top of your expenses, try these tips to keep cash flow moving:
1. Incentivise early payment
Offering a small discount for early payments could be the push your customers need to get their invoices paid early. Alternatively, you could add a penalty fee for late payments.
2. Invoice Finance
By utilising invoice finance, you can turn your unpaid invoices into cash. You are given a line of credit based on the value of your accounts receivable, so you’ll always have cash at the ready whenever you need it, without having to wait for your customers to pay their outstanding invoices.
3. Automate the Invoice Process
By using accounting software, you can easily keep track of payments and outstanding invoices. You can automate the follow-up process so your customers will be reminded without you having to lift a finger. Automating the invoice process gives you extra time to focus on more productive tasks — like creating an emergency plan for supply chain issues!
A bonus of using cloud-based accounting software is that our invoice finance facility seamlessly integrates with your software so your line of credit can be updated in real-time alongside your accounts receivable.
How Earlypay can Help Wholesalers
Earlypay provides cash flow solutions through our business financing options.
Invoice Finance
With invoice finance, you no longer need to put everything on hold while waiting for your customers to fix up their unpaid invoices. Invoice finance allows you to access cash from your unpaid invoices, as soon as the invoice has been issued!
By fast-tracking your cash flow, you can increase your purchasing power and take on new opportunities to grow.
Equipment Finance
Our equipment finance allows businesses to purchase essential equipment and vehicles without having to dip into their cash reserves or working capital. It also allows businesses to access capital tied up in their existing equipment which can be used to fund growth opportunities or get on top of other business debts.
Trade Finance
Pay your suppliers up front with trade finance. Whether you purchase products overseas or right here in Australia, trade finance provides funding to pay suppliers upfront — without having to spend your own working capital.
To understand how our business finance solutions could work for you, simply submit our enquiry form, and our friendly team will be in touch!
If you'd like to learn how Earlypay's Invoice Finance & Equipment Finance can help you boost your working capital to fund growth or keep on top of day-to-day operations of your business, contact Earlypay's helpful team today on 1300 760 205, visit our sign-up form or contact [email protected].