How Mid-Market Companies Can Optimize Supply Chain Operations for Strong Cash Flow and Focused Growth.
By TAKE Supply Chain
August 14, 2017
For companies of all sizes and across all industries, cash is not only crucial - it’s king.
Businesses must carefully manage the flow of their cash - making sure that payments aren’t going out faster than resources are coming in - simply to survive.
According to a recent study by Dun & Bradstreet on business failures, companies that do monthly cash flow planning have an 80 percent survival rate - more than double the 36 percent survival rate for those only planning once a year.
This discrepancy is partially because careful planning helps your company build up a solid cash reserve, and that reserve can serve as a life vest when there are weather disruptions, economic downturns or other unexpected obstacles.
A strong cash position isn’t just good for the bad times either; indeed, that same cushion can be used as investment capital - for starting new projects, upgrading equipment or bringing on new hires - when the economy is on an upswing and business is growing. Plus, well-managed cash can provide access to even more capital via financing, as higher free cash flow generally results in a lower rate of borrowing.
But while cash is important for all businesses, cash flow management is especially vital for mid-market companies in today’s economic landscape.
Because of their size, mid-market companies have a smaller financial war chest than their larger competitors, which means they have a reduced margin of error for the timing of inflows and outflows, a thinner cushion for tough financial situations and a smaller investment pool (including less access to capital) for financing growth.
As a result, it can take more effort and precision for mid-market companies to remain in a strong cash position. The good news, though, is that every small improvement in cash flow has an even bigger impact on your business.
And even more good news: Advances in technology and software can help your company automate supply chain processes, which has made managing cash flow easier than ever.