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Look out for these five cash flow killers in your supply chain

Your supply chain is directly linked to your cash flow. And right now, supply chains need to rapidly change course, react to changing customer demand and find ways to save money. But there are a few big obstacles killing your cash flow and affecting profit. Get in front of these things now. And you’ve got a good chance of keeping your business running long into the future.

#1 Hidden cost of sale

Many supply chain businesses find it hard to understand the actual cost of their sales. Say you’re a seafood distribution business, for example. The company buys fish for $15 a kilo and sells to customers at $20 a kilo. This seems fine — you’re making a profit. But you haven’t accounted for the hidden cost of sale — you also spend $4 per storage carton, $5 on transport and $1 on internal expenses. Suddenly, you’ve made a loss. Multiply that by hundreds of orders, and you can see how these costs can be an unpleasant surprise. Make sure you look at your costs in detail across your organisation, so you can see with certainty whether your products are making a profit.

Keeping across vendor costs is extremely important too. If a vendor changes their price for an item, make sure you’re not still charging customers the same amount, or you’re losing cash every time someone makes a purchase. And that’s a killer.

#2 Hidden fees on your imported goods

With half of Australian manufacturers and 60 per cent of supply chain businesses currently importing goods*, this one is becoming a problem. You may be importing certain goods to build or distribute a product for resale. The tricky thing is the unknowns.

You usually import your goods at, say, $200 per unit. Do you understand what the exact costs will be for fees, import duties and taxes? The overseas supplier will usually invoice you for these costs once the shipment is complete, separate to your inventory order. If you don’t know what these costs are upfront, and if they go up, that $200 unit suddenly blows out when freight costs are applied. Your cost of sale needs to increase to factor these in, and this is where businesses can be blindsided.

* 1406.0.55.005 – TableBuilder, User Guide. Australian Bureau of Statistics June 2020

#3 Manual administration (a cash and time killer)

You’ll probably have a fixed budget for employees, all with a specific role. Now, imagine having full-time positions that are solely dedicated to manual administrative tasks. Like re-keying data, writing out orders on paper and ticking them off, and processing sales orders. As well as handling multiple Excel spreadsheets.

Your salesperson is there to focus on bringing in new customers. What would it mean for your business if 60 per cent of their time was spent on admin? It’s a waste of that person’s skills, and you’re not getting the most bang for your buck. And you can be pretty sure that your employees don’t want to spend their days in and out of spreadsheets.

For an employee that spends 80 per cent of their day filled with admin, imagine how much time they could get back if their processes were streamlined. They could focus on bringing in more sales, analysing business data to help inform business decisions, and adjusting your cost of sale — a much better use of their time.

#4 Keeping way too much stock on hand

Not understanding the hidden costs involved in housing your inventory and stock can be a huge drain. Without clear visibility on your inventory, it’s easy to over-order stock. And the more stock you have, the more shelves you need so you’re paying for this excess.

If you’re unable to get your stock out in good time, you risk paying more for storing it. And with more stock, the more work your employees need to do to manage it.

Without a lean warehouse, a good eye on customer demand and reliable forecasting, overordering stock is an out of pocket expense for your business.

#5 Human error

It sounds like a little thing, but human error can be lethal. For companies with lots of spreadsheets or manual processes, you’re more prone to duplication or a keying error. And for every mistake made, there’s an impact. It could be processing the wrong sales order or discounting a product incorrectly. Or it could mean accidentally putting in the wrong quantity of stock. These are yet more cost to your business and affect your cash flow.

Find out how an Aussie seafood distributor was able to save over 2,000 hours on productivity and grow their customers base by 400 per cent with Wiise. Download the case study today.

About Wiise

Like all good things, Wiise started with a great idea: to give small and medium-sized businesses the tools and big business smarts available to large corporates, at an affordable price. We saw that the small and medium market was woefully underserved from a tech and banking standpoint. We wanted to level the playing field with a system that Aussie businesses could trust when they were ready to grow beyond managing the books.

So KPMG Australia joined forces with Microsoft and CommBank, bringing together industry experience, top-tier tech and banking know-how. And in August 2018, we launched Wiise. Class-leading cloud ERP software that helps you manage your business from anywhere, work together effectively and do business better.

Our aim was and still is to make it simple for you to access everything you need to run your business in one hub. Visit wiise.com today.

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