With more and more Internet and e-commerce businesses in the world today, it is no surprise that transportation and logistics businesses are gearing up for a spike as the holidays approach. Although August is historically the busiest month for imports into our country, some recent trends across the supply chain are raising concerns for multinationals and small businesses alike. However, with some planning, especially in terms of working capital, businesses can better navigate these rough waters ahead.
Many read that South Korea based container carrier, Hanjin Shipping Company Ltd., filed for bankruptcy last month. In a New York Times story, the disruption will affect the billions of dollars of cargo and goods from Asia to the United States. As big box retailers down to small and medium sized businesses (SMBs) await products to arrive at ports from Seattle to Long Beach, this will clearly impact the bottom line of businesses across industries.
Additionally, when you combine the fact that an increasing number of multinationals and original equipment manufacturers (OEMs) are delaying payments to their suppliers and vendors, it’s SMBs that are overwhelmingly impacted. In some cases, OEMs are pushing payments to their suppliers and vendors for 120 days (story). I am constantly fielding calls and questions from business owners that are facing difficulties when their payment periods are moving from 30 days, to 90 days to, now, 120 days.
This cash-to-cash cycle that SMBs are routinely dealing with when providing funds for an order but not receiving payment before maturity of invoice is what gives CEOs and CFOs nightmares. This problem is further intensified when financial institutions are unable to extend credit to SMBs to alleviate these concerns or provide the working capital needed to seize opportunities during peak periods.
All of these challenges can determine whether you remain profitable as a business. Understanding these and other obstacles for both OEMs and SMBs is why more and more businesses are turning to The Credit Junction. Having the most cost-effective form of non-depository credit available to SMBs provides CFOs and Controllers with the flexibility needed to better manage their balance sheet and supply chain disruptions.