Buying more stock/inventory using Debtor Finance or Factoring
It is common practice in business to work using a “just in time” inventory management system. This means that you hold minimal stock and buy “just in time” to fulfill anticipated orders. Hopefully, you have anticipated soon enough. Many don’t realise you can use debtor finance or factoring to cash flow your inventory.
Obviously, for businesses that are just starting out this method minimises risk as capital is not being held in excess stock.
However, for more established businesses, or businesses keen to grow; there are arguments for holding some additional stock.
1. Increasing customer satisfaction
• It is a known fact that we live in a world where people are used to getting what they want instantly, like NOW; and this is no exception in your business. By holding more stock you are able to fill orders quickly and therefore guarantee customer satisfaction.
• In addition to filling everyday orders promptly, having an inventory of stock means that you are able to cater to customers that need orders filled “right now” instead of simply having to turn these customers away. When you are able to solve a supply problem with that Customer you have been trying to get for years, you may have won a customer for life. Again, debtor finance or factoring can assist here.
2. Reducing costs by taking advantage of supplier discounts
• Suppliers and wholesalers often offer significant discounts when you buy in bulk when you buy more units. So not only are you decreasing the cost per unit but you are able to also take advantage of potential sales that the additional inventory brings.
3. Greater control in the event of supplier delays
• Unfortunately, it is not unheard of for suppliers to experiences delays. This can happen unexpectedly and often when you need stock fast. So, especially if you are in an industry that often experiences these issues, it can be helpful to mitigate the risk of this by having a level of inventory that you can use to fill orders in the meantime. If there is a jam in the supply chain your competitors are also likely to be impacted so not only are you reducing risk for yourself but you are gaining an advantage over your suppliers.
4. Larger range of stock is better for merchandising
• Also, having a larger range of stock available for immediate purchase is better for promotional and merchandising purposes. Customers will be attracted to a store that looks like it stocks a large assortment of products and having full shelves helps give off this impression.
Overall, it is in your interest to think about how buying more inventory could benefit you by reducing both costs and risk.
A business that need to carry stock should consider debtor finance and factoring to fund their stick acquisitions.
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