How to Leverage an Inventory Line of Credit

Posted on by Amanda Levine

Product-based businesses need inventory in order to survive. However, one of the biggest challenges they face is affording inventory while keeping operations afloat. Businesses often use an inventory line of credit to afford inventory without taking away from operations and growth. While a line of credit or other financing may come at a cost, focus on the growth you’ll be able to achieve as a direct result of healthy inventory stock and cash flow. An inventory line of credit is not the only solution for funding inventory, though. Be sure to do your research. A little bit later we’ll cover an alternative solution for inventory funding. 

What is an inventory line of credit?

A line of credit specifically for inventory is similar to a traditional line of credit. The main difference is that it’s secured by inventory purchase. Repayment terms may also be structured around inventory selling, which can offer more flexibility. On the downside, since lenders understand that inventory needs to sell before money borrowed is repaid (in most cases) they may charge higher rates and fees. A line of credit can be compared to a credit card. As an example, let’s say you have a credit card with a $5,000 limit. You can spend up to $5,000 on the credit card – as long as you keep up with monthly payments. Monthly payments can vary depending on the usage of the credit card. 

How does an inventory line of credit work?

An inventory line of credit is a line of credit that is secured by inventory. By using an inventory line of credit you can avoid borrowing against business or personal assets. However, if you default on payments, the lender can seize your inventory. A line of credit comes with a limit. While the credit line is open you can draw any available amount as needed to purchase inventory. For companies that need constant access to cash for inventory, a line of credit can be a good solution. It can also be a good solution if you’re struggling to qualify for traditional term loans and other financing options. Inventory loans present risk for lenders since the borrower typically needs to sell the inventory to repay the loan. Therefore, they may be harder to qualify for in general. Keep in mind they come with fees and interest too which will drive up the cost of goods sold. 

Common uses of an inventory line of credit

An inventory line of credit is generally limited to only being used for inventory. A general line of credit on the other hand can be used for most business expenses. The biggest advantage of an inventory line of credit is that it helps free up cash flow so that you can cover operating expenses and grow your business. Business owners face unforeseeable expenses everyday. Having access to cash that you may or may not need provides an extra layer of support. As a business owner, being proactive is always a good idea. 

What types of businesses can qualify for inventory financing?

If your business sells inventory, then you may be a candidate for inventory financing. Keep in mind, there are several types of financing and funding available. Depending on your situation and industry, the best type of inventory funding may vary. Below are some industries that qualify for inventory funding. To learn more about each industry, click on the links below!

How to qualify for an inventory line of credit

Qualification requirements can vary depending on the lender, but in general you’ll typically need to meet the following requirements:

  • Minimum time in business (6-12 months in most cases)
  • Must sell products or raw materials 
  • Meet inventory minimums (if set by the lender)
  • Provide proven sales
  • Personal credit score requirements may be considered

Most lenders can share basic requirements prior to submitting an application. To ensure you are working with the right lender or source, find out what requirements are involved before applying. 

What is the best way to finance inventory?

The best way to finance inventory is the one that costs the least amount, yet provides the most flexibility. The type of financing that matches this description can vary depending on what you qualify for. In most cases, term loans offer better interest rates than a line of credit, but can be harder to qualify for. Luckily, in today’s world, business owners are not stuck with traditional bank loans and means of financing. Startups and small businesses often reach out to backers and private investors for funding. You may want to consider alternative options for inventory financing. 

Is an inventory line of credit right for you?

A line of credit for inventory sure has its benefits. But as you know, there’s always a downside too. Ultimately, you may need to borrow money to grow or maintain your business. Whether you’re a startup that needs inventory to grow or a seasonal business experiencing a lull, financing can help overcome challenges. Sure, it comes at a cost, but what opportunity does it deliver? When determining if an inventory line of credit is right for you, consider the opportunity, but consider the risk too. Can you repay the loan? Are you confident about how much inventory you need? Will profits increase or decrease with additional expenses? By the time you apply for inventory financing, hopefully, you have some data to help you make decisions. Inventory financing can help businesses, but it can destroy them too – if they are not managed properly. 

In some cases, an inventory line of credit may be the best option. However, in some other cases, it may not be. Consider your own needs, explore what’s available, and always keep your vision top of mind. 

How Kickfurther can help

Qualifying and affording inventory financing is often where business owners encounter challenges. Created by an entrepreneur that once faced these two challenges trying to obtain inventory financing, Kickfurther was born.  Kickfurther can help you get funding for inventory up to 30% lower cost than similar options. 

Kickfurther is the world’s first online inventory funding platform that enables companies to access funds that they are unable to acquire through traditional sources. For companies that sell physical products or non-perishable consumables and have trailing revenue over $200,000 in the last 12 months, Kickfurther can help. We connect brands to a community of backers who help fund inventory on consignment and give brands flexibility to pay that back as they receive cash from sales. With more than $100 million in inventory funded to date, Kickfurther can help you get funded within a day or even minutes to hours. 

Closing thoughts

Being a business owner involves creativity. Some may think creativity only applies to the sales side of business, but trust us, it counts on the financial side too. You’ll have to come up with just the right formula to keep cash flow healthy. This may involve financing for some businesses, and that’s perfectly okay. In fact, it’s encouraged, but you’ll need to make sure it makes sense for your situation. Remember, if there’s a will, there’s a way. As a business owner it will be up to you to find the way. Hopefully, Kickfurther can be just the solution you need to fund inventory at an affordable cost. 

Interested in getting funded on Kickfurther?  Create a free business account, complete the online application, review deals, and get funded in as little as minutes!

Is invoice factoring right for your business?

Posted on by Amanda Levine

Invoice factoring provides business owners an alternative way to access working capital without having to rely on traditional means of financing such as credit cards or business loans.

There are a number of considerations to keep in mind when determining whether or not invoice factoring is right for your business.

What is invoice factoring?

Invoice factoring can provide businesses with an influx of cash while they wait for invoice payments from customers and clients. Invoice factoring allows business owners to sell invoices at a discount to a factoring company for cash. In most cases, the factoring company will get paid within 30 to 90 days. Invoice factoring is not a loan, but can certainly improve cash flow. For example, if you’re a contractor that needs to complete a $10,000 invoice project, you could sell the invoice in order to have enough cash to complete the project before payment from the customer is received. 

How does invoice factoring work?

Invoice factoring allows business owners to sell their invoices (at a discount) to an invoice factoring company who will then receive the payments from customers as they come in. Selling your company’s invoices in bulk results in a lump sum of cash that can be used to cover your business operations and other expenses. On the downside, you’ll no longer have the right to collect on your invoices and may bring in less money as a result. Your invoices are surrendered to the financing company, not used as collateral. However, if you took out a loan you’d likely need to pay interest and fees so no matter which way you go, “borrowing” money is never free.

What type of businesses use invoice factoring?

Invoice factoring can be a convenient and efficient way of improving cash flow for businesses of all sizes.

Invoice factoring is best for businesses who deal primarily with other companies, and often have to wait for invoice payments from those companies to arrive. Receiving invoice payments from other businesses is different from receiving payments directly from customers. B2B transactions often result in the use of 30, 60, or 90 day invoices while customers typically pay upfront.

Companies who have trouble qualifying for traditional forms of financing can especially benefit from using alternative methods like invoice factoring that are easier to obtain.

How invoice factoring benefits businesses

Invoice factoring has a number of potential benefits to businesses in all stages of their growth and development.

  • Fast access to cash: Invoice factoring helps improve your company’s access to cash versus waiting for payments from other businesses and clients to come in. It’s also a much faster method of obtaining working capital than waiting for approval for a traditional bank loan.
  • Improving cash flow: Using invoice factoring can result in having access to large sums of cash up front without having to take out a loan. For businesses that need to fulfill orders or complete projects, invoice factoring allows them to access the funds they need to complete work.
  • Easy qualifications: Invoice factoring is typically an easier process than using traditional means of financing such as bank loans. While your clients may need to meet certain qualifications in order to ensure that the invoice factoring company is satisfied, your requirements are minimal.
  • Offers flexible financing: One good thing about invoice factoring is that it’s there when you need it. There is no long-term commitment, no need to put up collateral or a down payment, and little to no risk involved.
  • Convenience: Another benefit of invoice factoring is that it takes away the hassle of having to constantly follow up with your clients and manage the collection of payments. Instead, your invoice factoring company will handle all of this for you. Of course, you sold them the invoices at a discount so there’s reward involved for them.

Pros and cons of invoice factoring

There are a few advantages and disadvantages to consider when evaluating whether or not invoice factoring is right for you. Pros and cons can vary depending on your specific situation. Here are some pros and cons of invoice factoring.

Pros:

  • Fast access to cash 
  • Improve cash flow 
  • No collateral required 
  • Flexible and convenient 
  • Provides the funds you need to complete projects or orders

Cons:

  • Hefty fees may be acquired (depending on the factoring company)
  • No guarantee that the factoring company will successfully collect on invoices
  • You may have to buy back or replace any unpaid invoices
  • Loss of revenue (since you have to sell the invoice at a discount)

What is the cost of factoring invoices?

The total cost of using invoice factoring services for your business will vary from company to company.

Generally, business owners can expect to encounter a variety of fees in the process of factoring invoices including application fees, processing fees, credit check fees, and late fees. In addition, the basic cost of doing business, known as the factoring fee, can run from 1% to 5%, depending on the invoice amount, the creditworthiness of your clients, your company’s sales volume, and other factors.

Invoice factoring vs. invoice financing

Invoice factoring and invoice financing are both reliable and convenient ways to convert your business’s unpaid purchase invoices into cash. However, there are some significant differences between the two.

Invoice factoring takes the bulk of the responsibility off the business owner, as the invoice factoring company then handles the collection of the invoice management and payment. When you work with an invoice factoring company, your invoices are surrendered in bulk in exchange for a lump sum of cash.

On the other hand, companies who use invoice financing retain the responsibility of payment collection from their clients and are granted cash upfront in exchange for the promise of repayment. The invoices are used by the financing company as collateral to help ensure the repayment of the cash advance.

Tips for qualifying for invoice factoring

Whether or not you will qualify for invoice factoring depends on a few key considerations. Invoice factoring companies may take a look at various aspects of your business including your sales volume.

The advantage of using invoice financing is that your approval is not dependent upon your personal or business credit history, but rather the credit history of your clients and customers. This means that even new businesses, struggling businesses, and businesses that have exhausted other means of financing such as credit cards and loans can still qualify.

Is invoice factoring right for your business?

The question of which type of financing is best for your business will depend on a few considerations. Do you prefer to be hands-off when it comes to payment collection, or do you wish to remain in control? Do you qualify for invoice factoring? Are the fees manageable for your business?

Invoice factoring is a good option for many businesses. Any company that has their cash tied up in unpaid invoices can benefit from improving their cash flow with invoice factoring or invoice financing. 

For product-based businesses there may be better financing options available.

How Kickfurther can help

While invoice factoring may work for service-based businesses, product-based businesses may be better suited with other methods of funding. One solution for product-based businesses that need funds to stock inventory and fulfill orders is Kickfurther. Kickfurther is the world’s first online inventory funding platform that enables companies to access funds that they are unable to acquire through traditional sources. For companies that sell physical products or non-perishable consumables and have revenue between $150k to $15mm over the last 12 months, Kickfurther can help. We connect brands to a community of backers who help fund inventory on consignment and give brands flexibility to pay that back as they receive cash from sales. 

Kickfurther can help startups fund millions of dollars of inventory at costs up to 30% lower than the competition. With more than $100 million in inventory funded to date, Kickfurther can help you get funded within a day or even minutes to hours. 

Closing thoughts

While businesses can generate healthy profits, cash flow is always a challenge. Most businesses need to use one or more methods to improve cash flow. Whether you use invoice factoring, a business loan, a line of credit, or inventory funding – or perhaps some combination of these choices or others, if managed properly funding can help grow your business.

Interested in getting funded at Kickfurther? Here are 3 easy steps:

#1. Create a free business account

#2. Complete the online application 

#3. Review a potential deal with one of our account reps

#4. Get funded in as little as minutes

Create a free business account at Kickfurther today!

How your business can benefit from outsourcing fulfillment to a 3PL

Posted on by Amanda Levine

Fulfillment is one of the most challenging parts of running a small business. As your business starts to scale, trying to ‘do it on your own’ could be to your business’s detriment. Outsourcing your fulfillment needs to a third-party logistics service (3PL) can save time and resources as you expand.    

What are fulfillment services?

A fulfillment service is a third party logistics company that stores, preps, and ships your orders for you. When you are balancing a growing team, working in small spaces, or feeling overwhelmed, investing in fulfillment services may be a great option. Once items are received, critical business decisions are driven by inventory status and availability.  Staying on top of this can be difficult as business owners are often focused more on growth than the intricacies of a logistics flow. 3PL services offer inventory tracking and its progress, while also updating stock constantly and keeping accuracy at the forefront. Challenges come when running a high growth business, so it may be beneficial to offload your fulfillment challenges to a 3PL service.

This strategic and necessary upgrade can result in massive gains for any size business.  Fulfillment services like Saltbox work hard to manage receiving, inventory storage, processing, and most importantly shipping.

What to consider when choosing a 3PL

Not all 3PL’s are created equal. From hidden costs for onboarding and membership to pricing based on square footage and inventory, many 3PL services prioritize large ecommerce companies over growing small businesses. Finding the right 3PL service that offers the most support for your business at the most affordable cost is key to growing your small company into a booming enterprise.  

Customer Success 

Fulfillment requires working hand-in-hand with a dedicated team that you can trust with your inventory. The right partner makes this easy and provides a personalized experience dedicated to your business success.  Saltbox is a premier 3PL partner that guarantees customer satisfaction and communicates with appropriate stakeholders as needed.  Their services allow you to focus on growth while they focus on securing your logistics and order fulfillment.

Pricing 

Choose a 3PL that has transparent pricing structures.  Hidden fees, and order minimums should not stall you from growing your business.  When choosing a 3PL try to consider pricing based on storage rates, packing, shipping, and hourly rates designed for special projects. Pricing should not take you for surprise, and all costs should be reasonable and predictable on a monthly basis.  

Proximity

Proximity is a critical component when choosing the right partner.  Their location should align with your current business structure. Our recommendation is to find fulfillment services close to major cities, your manufacturer or distributors, and last mile delivery to the local area.  A bonus is if you can be close to your fulfillment team to keep your business hands on and allow you to check in on your own inventory.

Multi-Channel Reach

Don’t let multiple platforms stop you from expanding your business potential. With fulfillment support, you will be able to reach new audiences. Direct to consumer orders can be supported as well and land your business ahead of the curve. 3PLs can support your business with platforms like Etsy and Shopify. With support across multiple channels, the right 3PL service will make managing your logistics simple.  

The Bottom Line 

Not all 3PL providers are right for your business. It is critical to do sufficient research when looking for the right partner to help you achieve your business goals. Choosing the right 3PL is not the work of a day, and you should feel empowered to make informed decisions after your search. Ask yourself where your business is right now, but more importantly understand where it is headed. Fulfillment services can allow you to focus more on growing your business and less on logistic challenges with a 3PL partner. 

If you feel confident about fulfillment services, consider expanding with a 3PL that offers a micro-fulfillment center within a co-warehousing facility. At Saltbox, you can work alongside your micro-fulfillment center in office and warehouse space. Additionally, as your orders and business grow and scale, Saltbox’s solutions will grow with you. The Saltbox difference is having a partner that operates as an extension of your team that understands the challenges of various size operations. Saltbox can help alleviate stress related to logistics services making it easier to run the most important parts of your business.

Saltbox serves as an invaluable resource for small businesses nationally.  Saltbox offers key fulfillment services and can benefit your growing business by focusing on personalized needs that many 3PL services overlook. When choosing a 3PL, make sure they are an extension of your business and can provide you with personalized solutions and offerings. No need to build your business on your own. Get started with Saltbox Fulfillment and let’s grow your business together. 

Why you should consider non-dilutive funding

Posted on by Amanda Levine

Small businesses have several options when it comes to securing working capital. From traditional bank financing and inventory financing to crowdfunding and grants, there is no shortage of resources for growing businesses to take advantage of. But, funding remains a constant challenge. Raising money through equity financing through venture capitalists or angel investors is the most common route, but it comes at the cost of diluting ownership. Fortunately, CPG brands have another option: non-dilutive funding. 

Non-dilutive funding is a funding option that does not require you to give up ownership in your company. In this blog post, we’ll explore the benefits of non-dilutive funding for CPG brands.

What is non-dilutive funding?

Non-dilutive funding refers to any form of investment that doesn’t require the surrender of any portion of ownership of your company. It does not require equity and the investor does not gain any ownership stakes. Non-dilutive funding is most often used in the startup stages of a new business, although it can be used at any time. Forms of non-dilutive funding include:

  • Loans
  • Grants
  • Tax credits
  • Crowdfunding
  • Inventory financing
  • Revenue-based financing

On the other hand, dilutive funding (also known as equity financing) refers to any type of funding where the business must sacrifice a portion of its ownership in order to secure capital.

Benefits of non-dilutive funding for small businesses

Non-dilutive funding is a great funding option for CPG brands looking to grow and expand without giving up ownership or taking on significant risk.

Maintain ownership

Non-dilutive funding is an attractive option for CPG brands because it allows them to maintain ownership of the company. This is a significant advantage over equity financing, which often requires entrepreneurs to give up a portion of their company’s ownership to investors. By keeping more control of your company, you can make decisions that are in the best interest of your brand and not just aimed at increasing shareholder value. This is particularly relevant if you have a long-term vision for your company or want to take a slower and more sustainable approach to growth.

Build credit

Non-dilutive funding can also be a great way to build credit for your business. Whether it’s through a loan or a line of credit, taking on non-dilutive funding can help establish your brand’s creditworthiness with investors, banks, and other lenders. Having solid credit can help you access more significant funding in the future and make it easier to secure additional financing when you need it. This can be particularly crucial when launching new products or expanding your brand.

Expand distribution

If you are a CPG brand looking to expand your distribution, non-dilutive financing can be an attractive option. With non-dilutive funding, you have the resources to secure strategic partnerships and expand your distribution network without having to give up ownership of your company. This can result in a larger customer base and increased sales for your brand.

Reduce risk

Non-dilutive funding can also reduce the risk associated with equity financing. Equity financing leaves entrepreneurs exposed to the risk of dilution, which can significantly reduce the value of their ownership in the company over time. By using non-dilutive funding options like grants, loans, and crowdfunding, you can minimize that risk and preserve your ownership over the long term.

Diversify funding sources

Finally, non-dilutive funding allows you to diversify your funding sources. Relying solely on equity financing can be risky, especially when investors have significant control over the direction of your company. Non-dilutive funding options allow you to bring in funding from a variety of sources and minimize the risk of relying on one investor or a small group of investors.

 

How do you raise non-dilutive funding?

Unlike dilutive forms of funding, you do not need to strategically place your business in order to attract angel investors or venture capitalists. With non-dilutive funding, you take advantage of the different resources and programs offered by banks, government agencies, and so forth. You may work with investors or backers too but instead of sharing ownership or equity you can offer collateral instead. 

Types of non-dilutive financing

There are several different types of non-dilutive financing to consider for your business needs:

  • Loans: Whether you secure your loan from a bank, credit union, or online lender, small business loans are a great way to access the cash you need to grow your business. Term business loans should not require you to give up ownership or equity, but in some cases, they may require collateral.
  • Grants: Grants are a popular form of funding that doesn’t have to be paid back. They can be difficult to find, but well worth the effort to apply. Grants may be found through government agencies, non-profits, and other businesses.
  • Tax Credits: Businesses can take advantage of the many available tax credits to secure working capital for their business come tax season, without the need to surrender any ownership or control.
  • Crowdfunding: Platforms like Kickstarter and Indiegogo offer new businesses a way to obtain funds via small contributions from many different people or organizations. Crowdfunding may have high upfront costs and expose product ideas, which could potentially cause someone to imitate your ideas. If you use crowdfunding, be careful and avoid equity crowdfunding, which is a form of crowdfunding that requires the surrender of a portion of your equity. If you simply need funding for inventory, there are better sources out there, which we’ll cover later on.
  • Inventory financing: Inventory financing allows companies to maintain stock even without invoices or purchase orders. It often works by funding your inventory on consignment, giving you the flexibility to pay back your balance as you receive sales revenue. Inventory is typically used as collateral. Inventory financing can be obtained by banks. Traditional inventory financing methods can be costly, but luckily there are affordable sources available for inventory funding. Kickfurther is one alternative source for affordable inventory funding.
  • Revenue-based financing: Revenue-based financing allows business owners access to instantaneous cash advances that are then paid back as a percentage of sales.
  • Royalty-financing: With this type of funding, business owners receive money from investors in exchange for a percentage of the company’s future revenues. This is often limited to a certain period of time and/or a certain amount and does not require the surrender of any ownership or control.

Identifying Risk associated with Funding

While raising funding is an essential part of a CPG business, not all sources of funding are the same when it comes to the level of risk involved. Understanding the level of risk involved in different areas of your business and how various sources of capital match those risks can help you determine the best funding option for you. 

The type of funding you use can have a major impact on your business’s risk profile. Generally, equity or dilutive financing is more risky than debt financing or non-dilutive options. And when it comes to inventory risk, it’s important to match the risk of your capital sources to the risk of the inventory. If you’re holding onto a large amount of inventory, the risk to your business is higher than if you have a low inventory level. In this case, it may be more advantageous to raise debt or non-dilutive capital, as it reduces the overall risk to your business while still providing the funds you need.

Another important factor to consider is the cost of funding. Generally, equity financing is more expensive than debt or non-dilutive options. This is because equity investors often seek a higher rate of return to compensate them for the perceived higher risk involved in equity investments. If you’re a startup or a growing business with a high-risk profile, it can be challenging to attract equity investors without offering them a higher rate of return. In this scenario, it may be more advantageous to explore other sources of capital, such as debt or non-dilutive financing, which can be less expensive and less risky.

How Kickfurther can help

Kickfurther funds up to 100% of your inventory costs on flexible payment terms that you customize and control. With Kickfurther, you can fund your entire order(s) each time you need more inventory and put your existing capital to work growing your business without adding debt or giving up equity.

Why Kickfurther?

No immediate repayments: You don’t pay back until your new inventory order begins selling. You set your repayment schedule based on what works best for your cash flow.

Non-dilutive: Kickfurther doesn’t take equity in exchange for funding.

Not a debt: Kickfurther is not a loan, so it does not put debt on your books. Debt financing options can sometimes further constrain your working capital and access to capital, or even lower your business’s valuation if you are looking at venture capital or a sale.

Quick access: You need capital when your supplier payments are due. Kickfurther can fund your entire order(s) each time you need more inventory.

Kickfurther puts you in control of your business while delivering the costliest asset for most CPG brands. And by funding your largest expense (inventory), you can free up existing capital to grow your business wherever you need it – product development, advertising, adding headcount, etc.

Closing thoughts

The need for funding can arise at any stage of business but is most common in the early stages. Startup and early stages can be the hardest time to get funding, especially while maintaining full ownership of your business. However, if you can get funding for certain parts of your business such as inventory or equipment, you can free up cash flow, thus reducing the need for other financing. 

Interested in getting funded on Kickfurther?  Create a free business account, complete the online application, review deals, and get funded in as little as minutes!

How to Manage Your Business Amidst High Seasonal Demand

Posted on by Amanda Levine

Small businesses have many moving pieces they need to manage in order to stay profitable and successful. Retailers who operate product-based businesses have yet another factor to keep in mind; seasonal product demand. Seasonal product demand amongst other techniques can help manage seasonal business demand. Keep reading for our quick guide on how to manage your business through the ups and downs of seasonal demand.

What is seasonal product demand?

Seasonal product demand refers to the fluctuations in consumer demand for a particular product or product category during certain seasons or holidays. All businesses experience sales cycles to some extent, resulting in slow and busy times. Most retailers experience some type of increase in product demand, most commonly at Christmas. Seasonal product demand can have a significant impact on your business. It’s important to track sales data so that you can forecast seasonal demand to better prepare and overcome slowdowns.

How seasonal demand impacts your business

Seasonal demand can impact your business by making it difficult to anticipate fluctuations in your inventory needs. In addition, retailers must prepare for the possibility of increased or decreased staffing needs.

To successfully overcome seasonal demand, businesses need to prepare. One way to do this is by forecasting. If you understand your busy and slow seasons you can hire for seasonal positions, adjust inventory levels, and obtain funding as needed to ensure plenty of working capital. Stocking just the right amount of inventory is key for maximizing profits while keeping cash flow healthy. Understocking can result in product shortages that cut into your potential profits at the most inopportune times. No retail business owner wants to run out of their best-selling product right at the time when demand is at its highest! Not only does this result in the loss of revenue but also can hurt your company’s reputation. In fact, some companies earn their highest revenue during seasonal periods, resulting in their annual numbers moving from the “red” into the “black” (hence the origination of the popular term “Black Friday” to describe the day when many merchants began to turn a profit).

If you’re operating a small business, these seasonal fluctuations can catch you off guard the first few years if you’re not prepared. Be sure to plan ahead for seasonal demand and watch your profits increase.

Examples of seasonal demand

No matter what type of retail business you run, you probably experience at least a few seasonal fluctuations in demand. A few examples of seasonal demand include:

  •     An increase in the demand for greeting cards at Mother’s Day and Father’s Day
  •     An increase in the demand for jewelry or chocolates at Valentine’s Day
  •     An increase in the demand for certain gift items during the month of December
  •     An increase in the demand for scarves and coats in the winter months
  •     An increase in the demand for swimsuits, shorts, and t-shirts in the summer months

Accounting for these increases (and decreases) in consumer demand can help your business become much more successful by planning ahead and avoiding overstocking or understocking your products.

How to manage seasonal product demand

There are a few ways to navigate seasonal product demand, these can include:

  • Ensure proper product categorization: It’s important for retailers to go through their taxonomy with a fine-tooth comb. Understand which types of products are especially susceptible to fluctuations in product demand, and when you need to increase or decrease your inventory of those products. Taking the time to prepare and adjust your products for seasonality is worth the extra effort to ensure your operations run smoothly all year round. This process is best supported through the use of analytics.
  • Utilize Analytics: Knowing and understanding your sales data is crucial to identifying your top-selling products and anticipating your business needs. Without a proper overview of key seasonal inventory fluctuations, your company will be operating with several blind spots. The longer you have been in business, the better you will get at spotting trends and patterns. You can utilize software to help you identify seasonal demands.
  • Follow Broader Market Trends: In addition to your own data, it’s important to look at what’s happening in the overall retail market. Understanding your target consumer and their current needs is key to preparing for seasonal demand. You won’t always be able to rely on what worked last year when new trends are changing the game on a daily basis. Some changes are predictable, and others are only uncovered by keeping up with current trends, so be sure to remain flexible and stay in the know.
  • Stock up on Necessities: When there are items you know without a shadow of a doubt will be in high demand during certain seasons, be sure to stock up on plenty of these foundational items. For example, if you own a skincare company it would be wise to maintain a large stock of sunscreen beginning in the spring and summer months.
  • Ensure Proper Communication: Communication across all aspects of your business is key. From how you choose to keep in touch with your consumer base to what information you provide to your manufacturers, suppliers, and other vendors – you’ll want to ensure clear and consistent communication before, after, and during seasonal fluctuations in product demand. For example, by offering discounts to consumers during slow seasons you can generate additional sales. Another example is communicating expected slowdowns to suppliers so they can deliver just the right amount of product.
  • Invest in Marketing: Marketing is always a good idea. During slow and busy seasons, you should market. During slow seasons you should make an extra effort to stay in front of customers and offer special promotions.
  • Plan Ahead: Use down times to prepare for the busy season. The time to plan for a rainy day is not when storm clouds are already brewing. Likewise, the time to prepare for Christmas is not the weekend before Thanksgiving. Begin planning, funding, and ordering your products far in advance in order to take the most advantage of seasonal demand. Consider using inventory financing to help plan ahead for these needs and be sure to have a good understanding of the different financing options available to you to help cover any gaps in funding.

Closing thoughts

There are many factors to keep in mind when it comes to managing your business through high seasonal demand. One of the most important aspects to manage is inventory. If you’re a new company it may take you a while to accurately forecast demand. Hang in there until you have enough data to accurately forecast. During busy seasons you’ll need to ramp up inventory, which can consume a lot of cash. Most businesses need inventory funding at some point. Perhaps for your business, the need is right before your busy season. Regardless of the timing, you can access quick and affordable inventory funding at Kickfurther.

How Kickfurther can help

Seasonal demand can take a toll on cash flow. To make sure you have enough inventory stocked and enough free cash flow, you can take advantage of inventory funding. Kickfurther is the world’s first online inventory funding platform that enables companies to access funds that they are unable to acquire through traditional sources. For companies that sell physical products or non-perishable consumables and have revenue between $400k to $15mm over the last 12 months, Kickfurther can help. We connect brands to a community of backers who help fund inventory on consignment and give brands flexibility to pay that back as they receive cash from sales. 

Kickfurther can help startups fund millions of dollars of inventory at costs up to 30% lower than the competition. With more than $150 million in inventory funded to date, Kickfurther can help you get funded within a day or even minutes to hours. 

Interested in getting funded at Kickfurther? Here are 3 easy steps:

#1. Create a free business account

#2. Complete the online application 

#3. Review a potential deal with one of our account reps

#4. Get funded in as little as minutes

Create a free business account at Kickfurther today!

The Basics of Cash Flow Management: Forecasting, Analyzing, and Improving Flow

Posted on by Amanda Levine

Being an expert at cash flow management takes time. And, it’s often mastered through mistakes. Every business has its own unique qualities so it’s important to thoroughly understand the operations. Cash flow management techniques can vary depending on operations, but you should be confident in the basics. You should also make sure you are working with accurate information. Learning how to manage cash flow is extremely valuable as a business owner or employee. An Intuit study found that 61% of small businesses worldwide struggle with cash flow. While struggling is normal, being unable to pay vendors, loans, and other expenses is not normal. Cash flow issues must be addressed in a proactive manner. 

What is cash flow management?

Cash flow management is the process of managing incoming and outgoing, cash and non-cash, flowing in and out of a business. To successfully manage cash flow you will want to know how to analyze transactions and identify opportunities. Essentially, the goal is to optimize the amount of money (or non-money) that you’re working with. You may be wondering how non-cash is part of cash flow management, so let’s take a second to understand. Non-cash items are items on the income statement such as depreciation, deferred income tax, amortization, and so forth. Including these items allows a more accurate view of the financial position of the company. In addition, these items can be used for tax advantages. If you’re in charge of managing cash flow, you’ll need to understand every item involved. Timing will be critical too to ensure that you will have enough cash at all times to cover any expenses. Most small businesses struggle with cash flow challenges. If you’re one of those businesses, dig in and create opportunities to improve financials. Cash flow is never easy, regardless of how much working capital you have. 

Why cash flow management is important

Cash flow management is important in businesses, but it’s also important in your personal life too. 

A personal life cash flow example is as follows. If your rent is due on the 15th and you get paid on the 20th, this can present a personal cash flow problem. The solution? Acknowledge the dilemma before it’s an issue. Can you push back the due date of your rent? Can you split the payment into two payments? 

A business cash flow example is as follows. You need to buy $10,000 of products to sell, but you won’t have enough money until you receive funds from the last batch of products you sold. You can’t let inventory levels get so low that you miss sales, so how will you afford more inventory without the cash? Whether the answer is net-terms or inventory financing, you’ll need to find a solution.

The point here – cash flow management is important to ensure that you have enough funds to cover your bills and expenses while turning a profit at the same time. 

How can I manage cash flow effectively?

Managing cash flow effectively starts with implementing processes for operations and collecting information. You must ensure you have the right information and maintain consistency. While you may be in charge of cash flow, you will likely not be the only one involved with activities that impact cash flow. Therefore communicating and following strict processes is important. Let’s take a look at a few ways to manage cash flow effectively. 

  • Determine forecasting objectives: Forecasting is critical for cash flow management. You need to know how much money you need and when you need it. To forecast, make a simple cash flow forecast. This will include four easy steps; determine how far out you want to plan, identify all income, identify all outgoing accounts, and understand your running cash flow on a daily or weekly basis. 
  • Choose your forecasting period: A forecasting period goes back to step one of the simple cash flow forecast. How far out do you want to forecast? The most important part of this objective is only forecasting as far out as you can without causing inaccuracy. Well-established businesses will be able to forecast out farther than startups or new small businesses. 
  • Perform a monthly analysis: Cash flow management will get better with time. It’s important to invest time on a monthly basis to reflect on your forecast versus your actuals. Make adjustments accordingly moving forward.  

Advantages of cash flow forecasting 

Cash flow forecasting is not an activity that should be optional. The advantages and benefits that forecasting can provide your business are endless. Here are just a few of the advantages that cash flow forecasting can offer:

  • Plan for big purchases and investments
  • Maintain a track record of on-time payments
  • Track overdue payments
  • Gain accurate insight to organizational earnings
  • Know financial health at any given moment
  • Make better business decisions
  • Avoid waste of resources and money
  • Allows you to see if spending estimates are accurate
  • Give investors a clear view of your company’s financial health
  • Automate forecasting with software 
  • Make it easier to see all of your options
  • Improve relationship management

Example of cash flow management in business

A simple example of cash flow in a business is a business that sells products to generate income. Revenue from product sales are incoming cash flows. This cash is used to pay employees, cover product costs, and pay for overhead expenses, which are all cash outflow. 

In order to keep up with cash outflow, you need to have enough cash coming in at the right times. While you may be planning to receive enough cash to cover outflows, if the timing is off, you’ll have a big problem on your hands. Businesses often solve cash flow timing issues with financing for inventory or a line of credit that they can draw on as needed. Product-based businesses often find much of their cash tied up in products. While products may be selling, income is not received immediately. In addition, you’ll need to tie up the cash again (maybe even before you receive it) in order to keep inventory levels healthy. Inventory financing can be secured through traditional banks and credit unions, but this route is often expensive and hard to qualify for. For these reasons and more, small businesses work with Kickfurther to get funding for inventory. 

How Kickfurther can help

Kickfurther is the world’s first online inventory funding platform that enables companies to access funds that they are unable to acquire through traditional sources. For companies that sell physical products or non-perishable consumables and have revenue between $150k to $15mm over the last 12 months, Kickfurther can help. We connect brands to a community of backers who help fund inventory on consignment and give brands flexibility to pay that back as they receive cash from sales. With more than $100 million in inventory funded to date, Kickfurther can help you get funded within a day or even minutes to hours. Companies can easily return to Kickfurther for several rounds of funding. In fact, companies that return after a successful round of funding often receive discounts and increased funding the second, third, or fourth time around. 

Closing thoughts

The future success of any business relies on cash flow. Even if a business is not for-profit, cash flow still matters. Everything in life and business costs money, so you’ll need to make sure you have the cash you need to keep operations afloat. One way to assist the financial health of your company is to take advantage of inventory funding. By taking stress off cash reserves you can invest in other areas of your company such as marketing and technology that can help you generate more income. If you’re constantly just barely keeping up, it can be hard to grow past where you are. Therefore, it’s worth it to take on the extra responsibility and costs too for inventory funding. Luckily now, you know just where to go for the best inventory funding option. 

Improve the financial health of your business. . . apply for inventory funding today!