How To Fix Poor Cashflow in the Food and Beverage industry

10 May 2021 Helpful Tips

Studies show that 90% of SME failure is due to poor cash flow. The most common kneejerk reaction that many food and beverage distributors turn to in poor cash flow situations is to concentrate on increasing sales. However, increasing your sales could actually create more harm for your cashflow than good.

EasyVend has put together 5 of the common causes of poor cash flow in the food and beverage industry and ways your business can fix them.

1. Overdue Payments

The biggest reason why food and beverage businesses experience poor cashflow is overdue payments. According to data recently released, the average amount of time it takes for an invoice to be paid in Australia is 26 days. Waiting almost a month for payment will instantly create an unhealthy cash flow position for your business. When invoices aren’t paid on time you are forced to find the funds in other ways, such as increasing loan amounts or cutting operational costs. 

Tips to avoid:

The reason many customers don’t pay their invoices on time is due to the process. To get customers to pay their invoices faster, you need to make it easy for them. Making a payment should be convenient and hassle free, they shouldn’t need to manually type the payment in.

It’s a good idea to implement a payment gateway system with a linked pay now button for all invoices. This allows your customers to pay their invoice through their email at any time and on any device. All they need to do is add their card number and click submit.

2. Overstock

One of the more common reasons for poor cashflow in the food and beverage industry is overstocking on inventory. When you start to evaluate your business costings and discover your starting to slip into a financial whole, the first area you should evaluate is the amount of stock you have.

When you stock too many products, it forces you to spend large amounts of money. Suddenly, you will find yourself in a situation of hoping that the products sell quickly, or you will run the risk of the product expiring and not being able to sell it. Losses could be catastrophic!

Tips to avoid:

Constantly review your sales cycle. Use your business data to accurately evaluate the quantity of orders you will receive on a weekly basis. You will need to take into account seasonal change, price changes and economical changes. This will ensure you don’t overstock and fall into a cashflow hole.

Accurate inventory management is so important. The best way to do this is through a food and beverage management software. Many businesses may be reluctant to invest money in a software solution but software’s such as EasyVend will give you an accurate recording and reporting of live stock and the different sales cycles. 

3. High business expenses

Failing to manage your business operations accurately you will quickly find yourself in a poor cashflow situation. The biggest operational costs for food and beverage businesses include your rent, Internet, electricity, and phone bills. While these costs are essential and often cannot be avoided. 

What can I do:

To stay on top of all your expenses you should frequently review all your business expenditure. You should document all your overheads and review them month on month. On top of this you should seek alternatives who could provide you with a cheaper solutions.

4. No financial planning

As the expression goes if you fail to plan – you plan to fail. If you don’t accurately budget, forecast sales, and evaluate your overheads you will quickly be in a poor financial state. 

Tips to avoid:

You need to create an accurate financial plan! To support the accuracy of your plan you should run it by a third party i.e. your accountant. 

5. Inaccurate product pricing

At the end of the day the revenue you bring in will determine the success or failure of your business. Your product pricing will affect your cash flow, If your price is too high, people won’t buy your products, but if your pricing is too low, you won’t be able to cover the costs of operating your business.

Tips to avoid:

Review the industry standard pricing as well as the pricing of your competitors. Make sure your prices are accurate to your customers expectations. Getting a customer through your doors is one task but retaining customers is a whole other ball game.

We hope you enjoyed this post, to read more of our helpful guides and industry news check out our blog here.

Where EasyVend can help?

EasyVend by Jeal is a complete food and beverage management software that automates the everyday tasks of running food and beverage business.

Using the latest technologies, EasyVend eliminates frustrations and time-wasting administration tasks to make business more efficient and streamlined.

With stock management, integrated accounting, payment gateway, online ordering, invoicing, receipting and so much more. EasyVend is the go-to solution for all food and beverage distributors in Australia.

Contact us today for a FREE no-obligation demo of EasyVend.

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