Cash Flow Tips in Times of Inflation

In Canada, inflation is creating some instability for businesses. Your suppliers may be set to raise prices, your clients or customers may be intent on spending less, and you may not be sure how to handle your own pricing scheme. One way to better ensure you weather an inflation storm is to focus on your cash flow. 

Between increased costs and lowered sales, some businesses will find themselves remarkably low on cash, potentially to the point of significantly impacting their ability to meet operating costs and stay afloat. How do you protect your working capital? Here are some cash flow tips specifically for times of high inflation.

1. Stop Extending Credit

Extending credit to your customers when inflation is minimal may make financial sense. However, as inflation rises steeply, the cost of that credit is amplified. What might have cost you $100 to deliver this month may cost you $120 to deliver the next. The money your customer is giving you a few months down the road is dramatically less valuable than the money you could get from them at the time you rendered your services. Of course, you’ll always have some delay between fulfillment and payment, but this delay is more disadvantageous during times of high inflation. Stop extending credit and create new policies or invest in new technologies that can encourage clients to pay you as quickly as possible.

In addition, you also should consider the possibility that your clients will be overwhelmed by inflation themselves and may not be able to pay you. Avoid bad debt and stress on your business by denying credit moving forward.

2. Increase Inventory - Wisely

Your supplies and inventory cost less today than they will tomorrow. Where your supplies or goods are shelf stable, you may consider purchasing and storing more, especially if you expect inflation to continue to rise. It is most wise to do this for core products or supplies that you are sure you will be able to sell. Stocking up on products that may decline in demand can leave you with inventory you can’t sell and further undermine the stability of your business. Stocking up on solid inventory can be a hit to your cash flow now but can make it much healthier down the road.

3. Understand the Risks of Loans

When you’re struggling to keep your cash flow healthy, a loan may seem like a good option. And, it can be, but the value of a loan is diminished during times of high inflation. By and large, loan rates increase during periods of inflation. If you have fixed rates for any loans or lines of credit you have then you don’t have to rush to pay them off. However, taking on new or having variable rate loans can be detrimental to your business.

4. Explore Invoice Factoring Options

Invoice factoring is a wiser way to achieve a healthier cash flow. In this arrangement, you send your invoices to a factoring company which pays them immediately, and then secures payment from your clients or customers. You get the benefit of your cash right away, which is essential as any delay in time means the value of your money is reduced. Your factoring company can even shield you from bad debt in what is known as non-recourse factoring, which is highly beneficial in times of high inflation. Whether you're looking for cash to increase inventory, hire, or otherwise invest in your business, factoring is an option worth considering.

Reach out to J D Factors to discuss how invoice factoring can help your business have healthier cash flow.

 

What You Need to Know about the Emerging B2B Ecommerce Market

Some B2B companies already had ecommerce sites set up to serve their customers. However, with Covid-19 preventing most traditional in-person sales, even more B2B companies are adopting an ecommerce model that allows customers to order much in the same way as B2C consumers purchase items on sites like Amazon. According to Forbes, B2B ecommerce has become one of the fastest growing segments for both new and established companies. Forrester Research projects that B2B ecommerce will make up 17% of all B2B sales in the United States by 2023.

If you’re considering creating an ecommerce site for your company, there are a few things to consider. Making the move from a personal, face-to-face sales process to an online one can boost convenience, and works especially well for companies that need to connect with younger buyers, but it has its pitfalls too. Here is what you need to know about B2B ecommerce.

General benefits of moving to ecommerce

Larger customer base: Moving online allows you to access a much wider base of customers. So long as you can ship your product or offer your service in their area, you can reach them online. Ecommerce is a key tool to expand your business.

• Convenience for customers: Customers find ecommerce to be highly convenient. They can access the store at any time, see their past purchases to buy again more confidently, look through product specifications at their leisure, and use new payment options.
• Avoid credit card fees: The world of ecommerce provides access to other payment options that may charge you less in terms of fees than traditional credit card providers. Some of your customers may prefer to avoid using credit cards as well.
• Customer loyalty programs: It can be easier to implement a customer loyalty program through an ecommerce site. These programs provide their own benefits to you, like providing a wealth of customer data and intelligence.
• Competition: As ecommerce has not been adopted widely across all industries, it may be a great opportunity for you to get a leg up on the competition.

Potential issues when adopting ecommerce

Starting up an ecommerce site for your business can be rewarding but is expensive and also brings risk, like any business change. You can protect your business from these issues ahead of time if you consider them first.

One issue is meeting customer expectations. Delivery expectations for clients are higher when they are buying online. They compare the experience to consumer-facing ecommerce and expect quick shipping, fast updates on shipping progress and more.

Web development has its pitfalls as well. You’ll need a highly intuitive and functional website right from the start, or you could deter customers who have bad experiences using your website's new functionality. You’ll also need a platform that is secure to protect your customer’s information.

Creating a website that can meet these needs can be expensive. Invoice factoring can help you build up the cash reserves to afford a quality website right from the start, by giving you access to your revenue the moment you send out an invoice. Many businesses work with companies like J D Factors to fund their growth and development, too. With invoice factoring, the factoring company pays you what you invoice your customer, minus a fee, and collects from the customer on your behalf. In the meantime, you can use that cash to fund initiatives like developing an ecommerce website.

J D Factors offers factoring services that can help you grow your business with ecommerce solutions, or in other ways. Contact us today to learn more.