As a business owner, having your finger on the latest trends has a direct impact on the success of your business. Understanding these three trends will help you hammer out an effective business strategy in the New Year.
Big companies extend supplier payments up to 90 days
Extended supplier payments means smaller businesses are forced to cut spending in areas of their business such as innovation, capital investment and even internal training. The implication of this is: smaller businesses postpone their growth and expansion and miss out on opportunities that they could have taken.
This trend also means businesses need to change their budgeting plans to ensure their cash flow forecast is accurate and can be met. Not only does this increase the amount of work business owners need to undertake, but it demonstrates that businesses need to cater for unexpected changes that may affect their cash flow. The lesson here is in preparation, and knowing the different options available when cash is required.
Retiring baby boomers means more businesses are for sale
Now that the global financial crisis is over and economic recovery is robust, the aging population of baby boomers will want to sell their businesses so they can enjoy their retirement. A flood of these businesses could easily overwhelm the market – perhaps leading to a devaluation of businesses across all industries. In the case that the supply of these businesses usurps the demand, the competition in the landscape will increase.
Banks are practicing tighter oversight on loans making cash the preferred method of doing business
While there has been an extended period of strong economic growth across the globe, the lending industry continues to exercise caution. This, coupled with the extended supplier payment terms, means businesses will need to think about their cash flow and map their business goals against the capital they have. Tighter loans have a similar implication to extended supplier payments, where businesses won’t have the necessary cash they need to meet certain goals. The worst case is that businesses may lose out to a competitor because they were unable to make a purchase or invest in a certain sector.
These three trends demonstrate the importance of having a steady cash flow in business. There are a few options businesses can take when planning their New Years strategy and assessing accounting needs. Aside from bank loans, businesses can also use the following strategies to deal with cash shortages:
- Increasing prices of goods / services
- Negotiating better payment terms with suppliers
- Flexible invoice financing or factoring
If you’d like to discuss a solution or find out more about these trends, feel free to get in contact with The Invoice Market.