5 ways to protect cash flow when buying stock
Stock purchases are the biggest recurring cash flow hit most product businesses face. Here are five practical ways to take the sting out of them - without starving the rest of the business.
1. Negotiate supplier terms first
Before reaching for finance, ask your supplier for terms. Even 14 or 30 days moves the payment closer to the revenue the stock will generate. Suppliers value reliable repeat buyers - long-standing customers have more room to negotiate than they think.
2. Order smaller, more often
One large quarterly order concentrates risk and cash strain into a single moment. Where freight economics allow, smaller monthly orders smooth the cash curve and reduce the cost of a wrong forecast.
3. Match repayments to the revenue curve
Stock rarely sells the week it lands. Financing that repays in one lump sum 30 days later often lands before the stock has turned into revenue. Weekly instalments over a longer window - like 26 equal weekly payments - track the way stock actually sells through.
4. Keep a working capital buffer
A simple rule many operators use: never let a single purchase consume more than half your free cash. If an order would breach that, it is a candidate for spreading the cost rather than paying upfront.
5. Use an invoice payment plan
An invoice payment plan pays your supplier in full upfront while you repay in equal weekly instalments with one flat fee. Your supplier relationship stays intact - they are paid on day one - and your working capital stays free for wages, marketing and the next opportunity.