Navigating the New Year: A Cash Flow Guide for CPG Brands

December 7, 2023

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A new year dawns, and with it, fresh challenges and opportunities for CPG brands. One critical aspect that demands attention is cash flow management (in fact according to a U.S. Bank study, 82% of businesses that failed cited cash flow problems as a factor in their failure). In this blog post, we'll explore strategies to help CPG brands prepare their cash flow for the new year.

Review Cash Flow for the Past Year

Before planning for the future, take a moment to reflect on the past year. Analyze your brand’s cash flow patterns, identifying peak periods and potential bottlenecks. Understanding the historical trends will provide valuable insights for the upcoming year.

Assess Receivables and Payables

Examine your AR and AP to identify overdue payments and follow up with customers to expedite collections while also ensuring your outstanding vendor bills are settled promptly to maintain positive relationships with suppliers - partnering with financing solutions like Settle Working Capital helps ensure vendor bills are paid on time.

Optimize Inventory Management

Take stock of your inventory levels. Identify slow-moving items and consider strategies to promote or liquidate them to prevent excess holding costs. While excess inventory ties up capital, insufficient stock leads to missed opportunities. Leverage technology like Settle to expedite inventory purchasing with easy, customizable purchase orders or, if you qualify, finance your inventory purchases with Settle Working Capital to prevent stockouts.  

Negotiate Favorable Terms with Suppliers

Engage with suppliers early in the year to negotiate payment terms. Building strong relationships can lead to more flexible arrangements, potentially alleviating short-term cash flow constraints. Explore discounts for early payments or extended payment periods.

Forecast your Cash Flow for the Next Year

Accurate forecasting is the cornerstone of effective cash flow management. Utilize data from the previous year and incorporate market trends, seasonality, and any upcoming SKU launches or promotions. A precise forecast will empower you to allocate resources strategically. Not sure how to get started? Check out our introduction to cash flow forecasting.

How Settle Can Help

Platforms like Settle provide affordable, flexible credit solutions tailored for every qualifying business to support your short-term cash flow needs. We also help automate your AP workflows so you can pay vendors through ACH, wire transfers, or paper checks with funds from your business bank account or through financing from Settle Working Capital (for businesses that qualify). We also project your cash outflows based on your bill payments and Working Capital repayment schedules in our intuitive, easy-to-read cash outflow graph.

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*The information in this article is for informational purposes only and should not be construed as legal, financial, or professional advice. Settle makes no representation or warranties, expressed or implied, and in no event shall Settle or its affiliates, agents, or employees be liable to you or anyone else for any decision made or action taken in reliance on the information contained herein.