Planning for a great 2023

January often is a month of planning for the year ahead and one that should be filled with optimism for the year that could be. Every business looks to grow year on year, to break the records set during the previous year. But how do we do that? The adage of ‘cash is king’ comes to mind again. Specifically, how to generate cash and how to put it to work for you in your business.

Simply, sales generate cash, which can in turn, be used to purchase more stock which is then sold to generate more cash. Most cash is reinvested into the business – by investing in stock or operating costs – to drive sales and so the cycle repeats. As most businesses know, the cycle is often not as smooth as you’d like, you may not collect payments for sales for several days or weeks from some customers and likewise, you may not have to pay suppliers for a period, or you may have to settle supplier invoices before stocks are supplied. All this is known as the working capital cycle – the length of time it takes to convert stock to cash and in turn to buy more stock.

Small businesses often don’t get the benefit of credit terms that larger corporates do and as a result must pay for stock upfront (suppliers are also more willing to discount prices if paid for upfront), long before the cash generated from that stock comes to fruition. This can often lead to a very tight cashflow or even a negative cashflow cycle. That is where GRID’s flexible lending products can be their most beneficial. A lump sum cash injection to buy that stock for the next couple of months (or settle a few outstanding invoices) with flexible repayments on the loan only made when you make your sales – when you generate more income, the loan repays quicker and when things are slower, the repayments are lower to keep cashflow flowing for your business.