Some of the most common business models are recipes for cash flow problems. Unless the business leader makes a consistent effort to ensure the system runs accordingly, complications will naturally arise. Few industries are more familiar with this concept than equipment and furniture wholesalers. Their business model revolves around invoices, which must be sent and paid within a time frame that allows them to promptly cover enormous overhead costs. You don’t have to be an industry insider to envision the high likelihood of something going wrong. Decreasing that likelihood means not just doing the bare minimum of what’s required to get paid on time.
This is how equipment and furniture wholesalers compete with each other: By seeing who can make the most cash flow improvements. The winner ends up with enough money saved up to expand and conquer inevitable slow periods.
Here are four ways to better manage your equipment and furniture wholesale business’s cash flow:
1. Invoicing Systems
It doesn’t matter how careful you are. Trying to organize invoices yourself will almost certainly cause you to ignore details, fall behind on what is owed by each client, or neglect to follow up on delinquent payments. The days of relying on a spreadsheet as an invoice to-do list are over. You have to remember to update it constantly while keeping tabs on other industry-related concerns like the fluctuating prices of inventory or supplies. The solution is an invoicing system, which are designed to give you more time in the day to concentrate on advertising, sales, and growth.
Invoicing systems perform various functions. They can create templates for invoices, automate invoices for recurring clients, and schedule reminders that are sent out a certain amount of days after the due date. This last function minimizes the gap between payments so you can plug more money into your business at a faster rate.
2. Don’t Invoice Only Once Per Month
Smaller wholesalers often make the mistake of only sending one invoice per month. The end of the month is usually when all pending orders have been filled, so they send the invoice when there’s no more work to be done. This might be what your clients are used to but there’s likely no contractual term that says it always has to be that way. Many wholesalers have found that a very easy way to avoid a cash flow shortage is to invoice immediately after you’ve completed each individual order. When you send invoices all throughout the month, there’s a good chance you won’t have to wait until the end of the month for all of your payments to come in.
3. Establish Systems In Other Areas
The main purpose of systems and automation is to complete more tasks with the potential to bring in more business. They might not generate revenue directly, but these tasks keep your business active, regardless of how the rest of your industry is doing. So, you can start with invoicing and then set up systems in more and more elements of your business. For example, you might want to have a template for a type of email you find yourself sending rather frequently. You can then automate that email along with other marketing materials.
4. Accounts Receivable Factoring
Accounts receivable factoring is primarily geared towards businesses that need a dramatic improvement in cash flow due to a host of circumstances. Your monthly expenses might increase right as you enter a slow period when, for reasons you cannot control, customers just aren’t buying. This might also happen to be the best time to buy bulk inventory or equipment. Prices are lower because demand is lower and supply is higher. With accounts receivable factoring, you could gain the means to quickly cover monthly expenses while taking advantage of cost-effective opportunities for expansion.
There is a stigma attached to accounts receivable factoring, but it’s based on the policies of traditional business financing institutions, as opposed to companies like United Capital Source. In the past, selling your invoice to a factoring company meant that the factoring company would “chase down” the customer or endanger the relationship by not explaining that customer’s business partner is not struggling. The company would also purchase invoices from customers with bad credit history, since taking longer to collect the payment allowed them to charge high fees. UCS, on the other hand, does not subscribe to any of these practices. Accounts receivable factoring already causes you to a lose a small portion of income, so it’s our job to make sure the financial benefits greatly outweigh this tiny caveat.
Strive For Long-Term Changes
The tools and strategies listed above have become increasingly popular now that more wholesalers are understanding the underlying roots of their biggest problems. If a payment gets held up, it’s often because there is no system in place to prevent this from happening or the loose system being used is not working. And instead of spending the majority of their days trying to generate revenue, they waste time correcting malfunctions that will eventually reappear. You’ve got to avoid either scenario if you want to truly confident about your business’s future.