In business cash flow is king. I know what your thinking, sounds obvious right, but you would be surprised how many Australian Food Distribution businesses are currently in a cashflow hole.
Yes, your business may be distributing the best products, have a strong recurring customer base and offer the best price but, if you don’t have enough money to get you through the time you supply a product to the time of payment, your business could be in some serious trouble.
So, what are the 5 signs your business could have a cashflow issue?
Before looking at the signs you first need to understand what cashflow is.
What is cash flow?
Cash flow is the amount of money being transferred in and out of your business as you trade. If you have more cashflow coming into your business, then what is going out your business will be cashflow positive. If your cashflow doesn’t cover operating expenses, you will have a negative cashflow.
5 warning signs to look out for
In the food and beverage industry it is imperative you have strong financial management. But if you fail to accurately manage the cash coming in and going out of your business, you could find yourself in a hole that can be very difficult to get out of.
1. Late Payments
The biggest cause of negative cashflow is late payments. Recent studies released by Xero shows Food distribution businesses wait 28 days on average for payment. It doesn’t take a genius to know if there is more money going out of your business then what is coming in, there is going to be a problem.
You’ve probably experienced having debtors in your business. If you just sit there and wait you will only make things worse. There are ways distributors can minimise debtors and increase cashflow.
Make your payment process easy! The easier it is for customers – the quicker they will pay!
Implement a Payment Gateway to automate your entire payment and invoice process.
2. No access to finance
If you're in a negative cash flow state, you will need to look at other alternatives for funds to continue operating. If your business is in this category, you are in some serious trouble.
The problem with looking for finance is it could take months before you can access it. By that stage it could be too late.
The last thing your business needs is not knowing how you are going to pay the bills.
3. Payroll Problems
If you find yourself struggling to pay your employees, there’s a high chance you’re in a negative cashflow position. Your employees are everything to your business – if they aren’t there how do you operate?
Missing staff's payments can hurt staff morale and motivation – This will only impact on other areas of your business.
4. Discounting product prices
The prices you sell your products for is vital when it comes to having strong cashflow. We get it! There are positives and negatives to offering discounts to customers. But if you are in a position where you are discounting products frequently you could be in a negative cashflow state.
With margins tight in the food and beverage industry you need to ensure your products are priced effectively, cover costs, and generate profit.
5. Your business isn’t growing
Do you feel like your business is living month to month? If so, you are in a negative cashflow position. Many times, the reason why businesses live month to month is because they aren’t growing. If your business doesn’t grow you will struggle to stay alive. If your business isn’t competitive with other distribution businesses, why would suppliers source their products through you?
The food distribution industry is facing many challenges. It’s so important you frequently assess your cashflow situation. Look out for the warning signs. Fortunately for distributors there are ways you can improve your cashflow.
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For food vendors and distributors, EasyVend supports and automates every part of your business, freeing you up to grow your sales unlike other ERP systems that are designed more for wholesale suppliers than for distribution businesses like yours.
EasyVend includes all your everyday needs like inventory management, online ordering, invoicing, receipting, delivery management, payment gateway, customer reminders, Xero integration and so much more.