The importance of cash flow management

Managing cash flow is crucial for any small business, but it's especially important in the Food & Beverage industry. As we know, margins can be tight, and managing working capital well is essential for success. Whether you're a startup or an established business, holding onto your cash effectively is key to ensuring the longevity and growth of your business!

The founders of Mimo have been in the F&B payments & financing industry for 10+ years, and have seen many of the drivers of success for early stage entrepreneurs. Below, we summarize some of the key aspects of managing cash flow as a small business in F&B. Some may seem obvious, but running through the list and thinking through opportunities to improve can help refresh some of the basics to stay in control.

The key drivers of F&B cash flow

1. Inventory management: There is a delicate balance to strike between having enough inventory to meet customer demand and keeping inventory costs low. Overstocking ties up valuable cash, while understocking can lead to lost sales and customer frustration. Keeping a close eye on your inventory levels, and using tools like inventory management software, can help you manage your inventory costs and improve your cash flow.

   
   

2. Manage Receivables and Payables payment terms: In enterprise & mid-market segments of Food & Beverage, it's common to work with suppliers and customers on credit. Smaller players may however struggle to get preferential terms in the early days. Managing your receivables and payables and minimizing your working capital is critical to ensure that you have the cash flow you need to keep your business running smoothly. Explore opportunities to improve payment terms with your suppliers and customers, and consider using tools like Mimo or invoice financing to help you manage your cash flow on both sides of the equation.

   
   

3. Control Costs: Controlling costs is crucial for success in the Food & Beverage industry. Make sure you have a solid understanding of your fixed and variable costs, and take steps to reduce costs wherever possible. From cutting unnecessary expenses to streamlining your processes, there are many ways to control costs and improve your cash flow.

   
   

4. Plan for Seasonal Variations: It’s no news that we can experience significant variations in demand throughout the year. A restaurant often experiences a surge in business during the holiday season, while a beverage company may see a slowdown during the summer months. Planning for these variations and adjusting your cash flow management strategy accordingly can help ensure that you have the cash you need to meet these demands.

   
   

5. Monitor Sales Trends: Keeping a close eye on sales is obviously critical to managing your cash flow. Regularly reviewing your customer base and sales data can help you identify trends and take action to improve your cash flow. For example, beware of slow payers, or customers dropping in volume commitments. If you experience a drop in sales, you may need to quickly adjust your purchasing, inventory levels and sales & marketing costs to sustain a healthy cash flow.

How Mimo can help

By focusing on the above aspects of cash flow management, entrepreneurs in F&B can ensure having the working capital and resources they need to succeed. With Mimo, we help entrepreneurs in F&B pay any supplier invoice with one click, while having embedded access to trade credit, and take control over cash flow within your workflow.

Don’t hesitate to reach out to learn more about how to improve your cash flow here.