How to Improve Cash Flow as a Wholesaler

Introduction

Trying to manage a wholesale business is hard at the best of times, even if all of your customers pay on time and pay accurately. On average, there are approx. 3 systems working together including your inventory, warehouse and accounting systems. We haven't even considered a customer management system, retail ordering system and the various odd ways your suppliers need to be paid.

So with this it isn't surprising that many wholesalers rely on customers paying by logging into their online banking system, creating a transfer, entering in an invoice number and ensuring that the amount transferred is the correct amount. Then rinse and repeat. If the customer has regular orders you need them to do this for bulk orders. What could go wrong right? Then what about the customers who want to pay using credit with their Visa or American Express?

If you're already using Xero for your accounting system, Pinch can automate most of this for you. The bigger your business grows, the more time consuming getting paid via bank transfer becomes. And let's face it, as a business owner Xero is a pretty boring place to be.

We will explore 3 of the Pinch features that are proven to help wholesale businesses improve their business and we'll throw in some testimonials in case you don't believe us...

Feature 1 - Batch Payments

The concept is simple, send out 1 invoice from Xero and get 3 or 4 paid in one lump sum. We know that if your good at what you do you should get repeat orders from stockists, probably on a daily or weekly basis depending upon the products you sell. Whilst this is great, it most likely creates a headache when getting paid.

Shown below you can see that "Tom's Pie Shop" orders from us fairly regularly. Tom currently has 3 invoices open in total. You're about to ship the latest order so you send out the invoice.

Figure: An invoice for Tom's Pie Shop also showing other open invoices

Tom receives the invoice and notices he has another 2 invoices that have been delivered but not yet paid for. He chooses to clear his account with you whilst paying the latest invoice. He's probably already sold your awesome pies so lets get the money into your account as quickly as we can.

Feature 2 - Xero Reconciliation

This brings us nicely into how we save time and money by reconciling each payment we process. In the example above, Tom paid 7 different invoices using his credit card. He's happy as he doesn't need to login to his online banking and calculate the total amount owed. You're now happy as all the invoices are immediately set as paid and the amount paid is now sitting in your clearing account. Great, you know that $2,297.07 is on it's way to you.

The money lands into your account. Now instead of hoping Xero has managed to reconcile the correct invoices from the bulk paid (it does a pretty good job, but hasn't developed psychic powers in it's current release) we have already identified exactly which invoices he paid, and all you have to do is click the green button. Now close Xero and get back to running your business.

Feature 3 - Payment Processing Surcharge

So Tom is great, he rarely pays late and he just wants to support this great supplier he's found for his pie shop. Paul however isn't so great, and he often leaves paying until the last minute possible. Your list of outstanding invoices for Paul just gives you a headache.

For Paul, you decide to remove the option to EFT the funds (he had his chance and blew it). Instead you give him an online credit card payment option as we are giving him the benefit of the doubt. If he's so bad at paying you he probably doesn't have great cashflow.

But for Paul, he's going to have to pay the card processing fees. This means you get the full amount of the invoice into your bank as normal and Paul gets a way to pay with credit.

Any payments Pinch processes with surcharging activated are still automatically reconciled into Xero for you so there is no extra work needed.

Hopefully this article gives you some good advice, and if you'd like to talk to a real human about solving some of your cashflow problems just book in a meeting will Bill below.