Questions

Thank you for asking this question! As someone who has owned multiple small-medium sized businesses, I know the importance of managing purchases in relation to cash flow. I prioritize the following when considering this question in relation to my own businesses.

1. Cash Flow-It is critical that you manage your ordering and expenditures as much as possible. For example, one of my businesses in the hospitality industry does a smaller business during the summer due to tourism taking away revenue whereas business booms during the fall and winter. There are two ways to consider this. You can either prioritize lean ordering/purchasing decisions in order to maintain a healthy margin during the summer months or you could use the summer months as a time to make necessary upgrades/purchases; especially if there are deals during that season. For example, I plan to make some upgrades this summer that will not be covered by summer revenues BUT I have put money to the side for these projects since September.
2. Customer Habits-Some items sell much better seasonally. For example, in the bar business, I generally place my liquor orders early in the week, have them delivered on Thursday’s in anticipation of the weekend rush, and pay the bill on Monday or Tuesday. This way, I get the benefit of the weekend’s credit card batches in the account before paying and I get the bill taken care of right away. During the summer, for example, I order less often and less of a quantity per order.
3. Purchasing-Big ticket items, briefly mentioned before, are often difficult to manage for small to medium sized businesses. As I stated before, I find it is vital to plan these projects in advance as much as possible and to create a buffer in the business account to cover unexpected purchases. The size of that account depends largely on the type of business and the rental agreement/real estate situation. This is less of a concern for my E-commerce businesses because they require much less monthly cash flow to run and there are generally no real estate expenses associated with operating them.

If you have any follow up questions, please feel free to ask. You’re also welcome to schedule a call for us to discuss your specific needs in further depth.


Answered 4 years ago

Unlock Startups Unlimited

Access 20,000+ Startup Experts, 650+ masterclass videos, 1,000+ in-depth guides, and all the software tools you need to launch and grow quickly.

Already a member? Sign in

Copyright © 2024 Startups.com LLC. All rights reserved.