What is the most important part of the human body? Many would say blood. So, what is the most important thing for a distributor? The answer should be capital, or more precisely, cash flow. For small and medium-sized distributors, the dynamic funds available for deployment may only be a few hundred thousand yuan per month. A smooth cash flow is the lifeline of a distributor. To manage the flow of funds well, one must first distinguish the nature of capital occupation.
As a distributor, capital occupation can be divided into: long-term occupation, fixed occupation, bad debts, short-term occupation, and cash on delivery.
The goal of cash flow management for distributors is to turn bad debts into active accounts, convert long-term capital occupation into short-term occupation, and increase the proportion of cash-on-delivery sales. (Of course, it is impossible to have no occupation at all.)
Long-term occupation — for example, downstream retailers. As hypermarkets and chain supermarkets grow larger, various fees increase and settlement periods lengthen, ranging from one to three months. It can be said that downstream capital occupation accounts for the bulk of a distributor's funds. Various fees may take at least one to two years to recover, while long settlement periods tie up most of a distributor's capital.
How to solve the problem of long-term occupation? For external stores, especially national chains, our bargaining power is limited and there are few solutions. The only thing we can do now is to strive to become the manufacturer's distributor (because such terminals cannot be ignored). This way, we can basically shift from quarterly settlement (common with national hypermarkets) to monthly settlement (with the manufacturer's settlement cycle), thereby converting long-term occupation into short-term occupation.
For local supermarkets, especially in areas where hypermarkets are not yet well developed, distributors should firmly grasp the initiative from the start, particularly with chain supermarkets that show good growth momentum. For fee negotiations, strive to negotiate based on sales commission points. Because as stores open more, sales generally do not increase proportionally. If you fall into the trap of calculating fees based on the number of stores from the beginning, you will never recover. Of course, whether you can resist the overbearing practices of some supermarkets depends on your negotiation power. Most local supermarkets, if they start with monthly settlement and maintain good customer relations, generally do not suddenly switch to quarterly or longer settlement periods. This is the inertia of old customers. On the other hand, many distributors and local supermarkets commonly use a 'pay-as-sold' system, which has obvious drawbacks. Under this system, the payment you can collect in the current month is often for goods delivered several months ago, because most of the goods are still on the retailers' shelves and in their warehouses, and they have not been sold yet. Settling based on delivery quantity and batch is most favorable to distributors, so try to avoid the 'pay-as-sold' system.
For fee negotiations, if a distributor has several best-selling brands, they can be very useful. Leverage their combined power and do not negotiate one-on-one alone; use the bargaining chips that multiple best-selling brands bring. If conditions permit, you can also ally with distributors of other brands, which is beneficial for both parties. As for collection principles, always collect due accounts, and do not collect accounts that are not yet due unless there is a strong reason.
Fixed occupation — includes monthly operating expenses, personnel wages, taxes, and other expenditures. Professional financial management is essential, including expense planning and reasonable tax avoidance. Can you ensure that every position has a full workload? Relying on casual arrangements is no longer sufficient for the pace of modern commercial circulation management. Reasonable monthly expense management can also increase the space for fund allocation.
Handling bad debts — includes two aspects: downstream supermarket closures and product stagnation. For the former, all you can do is prevent it. Visit all supermarkets once a week, and never miss it. For supermarkets on your watch list, visit every three days or even daily, and always maintain a keen sense of smell; otherwise, it will be too late. For the latter, you need to be cautious when selecting new brands and products to distribute. Do not rush to place orders before the manufacturer has a clear operational plan and strategy. For new items from existing brands, check whether the manufacturer is promoting them as main products or not, and whether they are long-term strategic items or short-term profit items. Only after clarifying this should you place an order. A comprehensive and timely accounts receivable management system is also a powerful weapon to reduce bad debts.
Short-term occupation — the bulk is basically with the manufacturer. When a distributor pays for goods and places an order, there are basically two considerations: whether the goods can be sold quickly and what the profit margin is. For best-selling and mature brands, this is not a problem; but for unknown brands or products with uncertain market sales, distributors need good judgment.
Cash on delivery — this is, of course, the most welcome content for distributors. But whether you can achieve cash on delivery mainly depends on whether you have best-selling brand products, whether your sales network is complete, whether your after-sales service and delivery capabilities are excellent, whether your commercial credit has been established, and how much of your sales come from township networks.
Because best-selling products can immediately achieve cash on delivery; a complete network and good after-sales service and delivery capabilities make retailers willing to pay cash; good commercial credit makes downstream customers confident to pay cash; and township network sales are basically cash on delivery now.
So, dear distributor friends, if you want smoother cash flow and want to operate a larger market with less capital, the township market and products targeted at township sales will be the best way to achieve this wish.
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