A strong increase in activity
Why?
When a company’s activity increases, which is good news, it leads to higher than usual operating costs, especially if the increase is unexpected: purchases of raw materials, additional human resources to be mobilized at the last minute… All the levers are activated to meet the growing demand. However, by definition, these new orders in the process of being processed have not yet been paid for. This exceptional need for resources must therefore be financed by the company and the natural turn is to its cash flow.
How to protect yourself against it?
Knowing how to anticipate growth and/or peaks in activity or the seasonality of their activity is a necessity for any company in order to ensure that it is able to finance future needs, in the short or long term: sufficient financing, adequate human resources, better procurement negotiations… Stay in control of your activity!
Late payment delays
Why?
Although payment terms are defined in the elements of the contract or invoice between the two concerned parties, it can happen that the payer is late (lack of funds, deficient accounting process, bad practices…). These delays result in the receiving company with large payment holes in accounts that are difficult to overcome if they accumulate, forcing them to overdraw, often at high rates to pay their own bills and fees.
How to protect yourself against it?
If the service contract provides for a recurring payment spread over several months, SEPA direct debits may be an interesting option. Of course, this does not prevent from learning as much information as possible about the health of the client company and its ability to honour its payment commitments. As a last resort, collection is still the best way to remind customers about missed payments.
An increase in stock
Why?
Storage is expensive! In space for rent to store but also in energy if it is necessary to keep the stocks in question under specific conditions (temperature, humidity rate…). In the case of perishable goods, the problem increases with the risk of having to destroy these goods, thus representing a dry loss as well as an additional cost for the company. Once again, these costs can be covered by cash flow if it is sufficient.
How to protect yourself against it?
Inventory management is an increasingly important strategic challenge for companies that take care, thanks to increasingly efficient tools, of anticipating the state of stocks as much as possible and thus avoid overproduction or overinvestment.
If credit is a practical and reliable solution for managing a cash flow problem, it should preferably be used to support a development effort or to cope with a peak in activity!
If this is the case for your small business customers, contact our teams!
Ditto Services (France), société par actions simplifiée au capital de 590.000 euros, enregistré au RCS de Nanterre sous le numéro 842 578 320.
Banque Travelex, société anonyme au capital de 72 599 428.08 euros, RCS Nanterre 389585233. Banque Travelex est agréé en tant qu’établissement de crédit par l’Autorité de Contrôle Prudentiel et de Résolution.
