How Healthy is your Cash-Flow?
We all know that cash flow is king in business. Operating capital is critical to keep projects on track while you build equity and profitability in your business. But the current economic and political environment in South Africa makes cash flow and project management challenging, to say the least!
Lockdowns, load-shedding, port congestion, rising transport costs and rampant oil price hikes are seriously hampering cost control efforts. Add business closures, stock shortages and production delays due to Covid-19, not to mention the recent truck blockades and impending petrol price increases, and the outlook for project management and budget control looks bleak. Even the Medium-Term Budget Policy Statement (MTBPS) by Finance Minister Enoch Godongwana was postponed due to the local government elections.
But all is not lost.
These disruptions should be seen as an opportunity to streamline processes and “pivot” your business for the better. Effective cost control, pricing strategies and project management processes go hand in hand with profitability and sustainability.
Here are a few tips to better manage your budget and keep a healthy cash flow:
By sourcing locally available raw materials and/or products, you not only minimise potential delays to projects but also pay in local currency (and reduce the potential impact of exchange rate fluctuations). A two-week lead time is far preferable to the 8 – 10 weeks delay on imports!
Floorworx uses South African limestone rather than imported chalk in their vinyl manufacturing. This ensures a steady supply of raw material at a stable cost whilst preventing any import or shipping delays to production.
Ask for deposits on custom projects or long-term orders with milestone payments and plan your payments accordingly.
Floorworx’ Just-in-Time delivery enables you to order your vinyl flooring in phases to suit your project rollout. Your payments can be planned accordingly whilst simultaneously reducing the need for expensive storage or the potential risk of loss or damage to your stock.
USE YOUR INVENTORY AND RECEIVABLES AS COLLATERAL
Strong inventory levels and good receivables (for progress or milestone payments on projects) can be used as collateral for credit lines at the banks.
Floorworx’ has partnered with Lulupay to help clients secure cash for their large projects so they can get the materials they need on-site, on time. Speak to one of our sales teams to find out more about Lulapay and the options available to you.
OFFER EARLY-SETTLEMENT DISCOUNTS WHILST SECURING PREFERABLE PAYMENT TERMS FOR YOURSELF
Incentivise customers with early settlement discounts, and even take advantage of early settlement discounts or preferable payment terms from suppliers yourself.
Aside from the obvious cash-flow benefits of securing favourable payment terms from a local supplier over the usual COD payments required for imports, these budgeting strategies will improve your cash on hand and enable you to strategically manage your cash outflow.
CONDUCT A RISK ANALYSIS
Evaluate your customer AND supplier base to determine your risk exposure to adverse events such as business closures, scams or insolvencies. An over-reliance on one customer or supplier leaves you vulnerable to their problems which could have devastating consequences to your business.
Similarly, shady imports and/or unknown overseas suppliers may leave you vulnerable to scams, expensive freight charges and/or confiscation by customs. Here you could lose your money or your hard-earned reputation.
Floorworx is a reputable flooring manufacturer with over 69 years of experience in South Africa. The benefits of buying local are obvious: Product availability, shorter lead times, reputable supplier, fixed cost prices and preferable payment terms, on-time delivery and improved cashflows. Who wouldn’t want that? Specify SA. Everyone wins.
For more information, contact FloorworX:
Tel: 0861 833 338
 Ronald P. Hafner, Christopher R. Blaylock, 2020, “9 ways manufacturers can manage and increase cash flow,” Mar 24, 2020, https://www.wipfli.com/insights/articles/mad-covid-9-ways-manufacturers-can-increase-cash-flow