Do you have a realistic assessment of your immediate cash needs? Not your if-all-goes-well-and-my-suppliers-cut-me-some-slack assessment, but the bills you need to pay in the next 12 months.
The reality is when resources tighten, business owners have to make tough decisions and prioritize which suppliers and bills to pay. Don’t be cavalier or emotional about this. Short-sighted decisions could have long-term impacts on your credit rating. Instead, a few suggestions.
1) Remember that cash flow and profits are not synonymous. To function optimally, when you get paid is as important as the profit margin you make on a transaction. If you can’t afford the next order of raw materials or to pay the rent, you can be out of business quickly.
2) As an economy tightens, reach out to suppliers and make sure you’re maximizing your payment terms. Offer your buyers discounts if they pay early. Optimize your inventory.
3) In good times create an “emergency cash reserve” to carry you through economic dips.
When the economy is challenging, discipline is essential. But well-timed infusions of working capital can be a powerful tool. At Inxeption, we just introduced a new service for our merchants called Ship Now, Pay Later. This allows them to hold on to more of their cash reserves by opting for extended terms on shipping costs. This can help with adding inventory, making other investments, or allowing receivables and payables to align more favorably.
At Inxeption, our focus is always on helping our commerce partners Do Business Better.
Here's to your success!