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Cash Flow Protection Strategies For Your Wholesale Business
By Sarah Pearson Published: 06/04/2009
When the economy makes life difficult for the small business owner, it can mean the end of that small business. You definitely don't want that to happen to YOUR small business, but if you have not yet faced an economic situation like this before, you may be unsure of how to proceed in order to protect your wholesale business and make sure it thrives and succeeds even when the economy is not really doing the same.
One of the most important things to focus on during trying economic times (and even when they're not trying, truth be told) is your cash flow. Cash flow is the lifeblood of your business, and as such, it must be treated with great care. A bad economy means it's often more difficult or expensive (or both) for you to borrow money, making cash flow even more vital to the survival of your business.
Fortunately, there are a few things you can do to protect your cash flow and make sure that money does keep flowing just like you need it to. The first thing to do is stay informed. It is impossible for you to ride out a storm if you don't know the storm is coming. Watch the leading indicators for your business and keep an eye on economic condition changes.
To help you see what changes might need to be made and when, prepare cash flow projections for the coming year, and make a plan. What would you do if your predicted cash flow dropped a certain percentage? How would you be able to remedy it? These are questions you should have answers ready for should the occasion you need them ever arise, and keeping a watchful eye on what's going on will help you make those answers count.
Make sure you get paid in a timely fashion by your buyers. Invoice promptly, because putting invoicing off makes your buyers think you don't care that much about being paid in a timely manner, and will encourage them to not actually pay you in a timely manner. Clearly state any due dates for payment, and promptly send overdue notices if you are not paid on time, and you should even make use of collection agencies if you have to in order to make sure you are paid what you are owed when you are owed it.
These are just two things you can do to help keep the cash flow flowing, though there are many more things – like renegotiating your lease if you have a bricks and mortar operation or seeing if the credit terms from your suppliers allow for a longer payment period in which you can pay off what you've purchased from them. No matter what methods you use to do it, make sure you do – it can mean the success or failure of your small business during trying economic times.
