6 December 2023
Table of contents
Table of contents
When you manage your own business, it can be hard to keep track of suppliers and make sure you’re getting the best deals throughout your supply chain.
One thing you’ll want to see as part of this is a ‘positive’ cash flow. This simply means there’s more cash coming into your business than there is going out at any given moment. A way to ensure this happens is by implementing efficient supply chain management.
We’ll discuss why it’s important and what it means for your cash flow.
Supply chain management (SCM) is the process of overseeing the flow of any goods or services within your business:
If you’re in charge of managing the supply chain for your business (or even if you’re the only person in your business!), it’ll be your job to improve its efficiency and reduce costs where you can – increasing your chances of a positive cash flow.
What to consider
How you obtain any raw materials
Your manufacturing sites (including how big they are, their location, etc)
How your customer orders are processed
Inventory management
Your order dispatch process
What it means
This includes where they are sourced from, how long it takes to source them, and any agreements you have with suppliers. Your raw materials might also include items you need to deliver a service.
Here you’ll look at things such as the volume of goods the site can process (and how fast), how close your sites are to one another, and how your goods move from one site to the next, and how efficiently you use the space – even if all this takes place within a home workshop.
The customer order is an integral part of managing your supply chain – it’s both the trigger and the end point of the cycle
How you collect and dispatch your inventory has a huge impact on your supply chain – as well as how long your inventory is stored (which might affect your storage costs and therefore your profits).
This is how any inventory is removed from your warehouse or storeroom, processed, and most importantly, shipped to your customer.
As an example, if you’re looking to improve the order dispatch process then you’ll likely be aiming to have your orders sent out quickly, in the most cost-effective way. Delivering your orders safely to your customers in a time-efficient manner may increase the chances of them returning to purchase more. A higher volume of returning customers means more money coming in, and better cash flow.
Alternatively, you could go with a cheaper courier that isn’t as reliable, but in the end that may damage your reputation, leading you to less custom and potentially a negative cash flow.
Supply chain cash flow is all about balancing the total amount of payments scheduled to go out to suppliers, versus the total amount you expect to receive from customers and other revenue sources in the same time period.
Lots can go wrong in a business, such as suppliers underperforming by taking their time with supplying the goods or sending poor stock, technology issues, or errors in your forecasting.
This means it’s vital to try and build a strong cash reserve, so if you do have a small blip while running your business – you don’t need to panic.
Effective management is key to ensuring you stay on top of your cash flow, but we understand it can sometimes be tricky to keep your head above water, especially in the face of unexpected expenses.
If you have a good relationship with your suppliers, there’s nothing stopping you from negotiating prices, or even asking for discounts if you order things in bulk. If you’re struggling with cash flow problems or feel they may arise, you could also discuss extending your current payment terms.
Maintaining a great relationship with suppliers means your communication will be consistent and you’ll work together to keep your customers happy. If not, you might feel it’s time to review the suppliers that you’re working with.
Customers who are late paying the bill are a common cause of disruption to a business’s cash flow. Even though people should pay on time, every business owner has experienced someone who simply won’t pay. If you want them to pay today, you could give them a one-off discount, or add terms stating overdue payments will have interest added on to them (this may make people pay much faster, reducing any cash flow issues).
It’s also worth looking into using an invoicing system which includes automated payment reminders!
You’ll find technology can automate a lot of the supply chain process for you, ensuring there is a reduction in errors, as well as helping you save money.
An example of this is your inventory management. If you use our very own Pandle for example, you can manage your inventory stock in ‘items.’
Items is our inventory management system that helps you automatically track stock levels in real-time. You can also add items to your invoices to populate all the details you need quickly (which makes your supply chain run much more efficiently).
You can use supply chain metrics such as:
Reviewing and managing your supply chain can help protect cash flow in your business. For example, if you keep ordering stock that isn’t selling, or order too much at a time, it could tie up funds that are needed elsewhere.
Having that overview and insight into your business will help you understand what’s working and what isn’t – just remember that supply chain management is always a work in progress!
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A creative content writer specialising across business, finance and software topics. I have a love for all things writing, and creating engaging, easy to understand content that helps everyday people!
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