Whilst making strong sales and profits is usually an essential part of business, it is also extremely important to ensure you are in control of your cashflow to allow your business to keep operating. This is where the saying ‘CASH is KING’ comes from and why it is recommended that female entrepreneurs be aware of what stock requirements, payable and receivable payment terms.
Without knowing this information or having the right banking solutions in place, it could see your business regularly running out of money to cover fixed costs or to pay suppliers which in turn puts a strain on those relationships or even worse, can stop business production.
For example – say you are an organic juice manufacturer/retailer and have agreed on 7-day payment terms with your suppliers and know the expected sale time for each juice is 28 days.
- Day 1: You purchase your stock (fruits, vegetables, glass jars and labelling etc)
- Days 2 – 5: You manufacture the juice and have ready for sale
- Day 6: The juice goes on the shelf
- Day 7: You pay the supplier for the stock received on day 1
- Day 28: The juice is sold and you receive the income
This would result in you collecting the funds 28 days after stock arrived and 21 days after you paid for it.
Perhaps your business could sustain the 21-day time frame between payment made and funds collected, however in some industries it may take up to 90 days to receive the funds from when you initially purchased the stock. By not being aware of your cashflow cycle and where necessary, having the right banking facilities in place, it could restrict business operations and growth should you not be able to withstand an unexpected larger than usual order.
As Finance Brokers, we have worked with many businesses to establish working capital solutions and an example of these are –
- Overdraft facility
- Invoice discounting/debtor facility
- Business credit card
- Equipment or Asset Finance facility
Whilst every business is different and has different requirements and solutions, it may be worth talking to your trusted advisors about your working capital cycle and what solutions may be available to assist your business’s cashflow.
Credit Representative 490860 is authorised under Australian Credit Licence 389328 www.finarc.com.au Your full financial situation would need to be reviewed prior to acceptance of any offer or product. ‘Subject to lenders credit criteria, terms and conditions, fees and charges apply’