Typically, businesses experience funding needs when they need to buy materials to produce goods for new contracts, but haven't yet been paid for other contracts already finished; either that, or when a new, large contract is undertaken which requires a larger capital investment.
Every business has a different trade cycle (the time it takes from receiving an order, through buying materials, producing the goods, shipping to the customer and receiving payment). This depends on many things, but includes:
- which sector you operate in
- what terms you have agreed with your suppliers
- the length of time it takes you to produce your goods
- transport used to ship; and
- the terms you have agreed with your buyer
The trade cycle
The typical trade cycle follows these six stages.
To help you identify where you need funding most in your own trade cycle, we have provided a Cashflow calculator.
- Once you have identified the points at which you require funding, we have a range of international solutions tailored to your export and import needs.
Manage your cashflow
- As well as taking advantage of tailored funding solutions, you can help to keep your cash flow moving in a number of ways.
Late payments can cause cash flow problems, reduce your profits and waste valuable staff time when chasing payments. So how could you help to prevent this? Here are a few points to consider:
- undertake a credit check on your buyers to make sure they can pay. But don't forget your suppliers: a reliable supply chain is equally as important
- ensure your sales contracts include detailed payment terms and the date by which invoices should be settled: make your contracts legally binding
- consider including a financial penalty for late payment, but also balance this with incentives for early payment too
- don't rely on a single buyer or supplier - using a number of buyers and suppliers helps spread the risk in the event that one of them should fail
To help you identify where you may need funding in your trade cycle, use our Cashflow calculator.