The importance of cash flow management for F&B businesses

Managing cash flow is crucial for any small business, but it's especially important in the food and beverage industry. As we know, margins can be tight, so successfully managing your working capital is essential for success.

The founders of Mimo have been in the F&B payments and financing industry for 10+ years and have seen many of the drivers of success for early-stage entrepreneurs.

Below, we summarise some of the key aspects of managing cash flow as a small F&B business. Some may seem obvious, but running through the list and thinking through opportunities and ways to improve your process can refresh some of the basics and help you stay in control.

The key drivers of healthy cash flow 

Inventory management

There’s 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 stock levels and using tools like inventory management software, can help you manage your costs and improve your cash flow.

Payment terms for payables and receivables 

For F&B SMEs, 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 minimising your working capital is critical to ensure 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 factoring to help you manage your cash flow on both sides of the equation.

Control costs

Controlling costs is crucial for success in the F&B 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.

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 at the start of the year and during the summer months, for example.

Planning for these variations and adjusting your cash flow management strategy accordingly can help ensure you have the cash you need to meet these demands.

Monitor Sales Trends

Keeping a close eye on sales is 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 and marketing costs to sustain a healthy cash flow.

How Mimo can help

By focusing on the above aspects of cash flow management, F&B entrepreneurs can ensure they have the working capital and resources needed to succeed.

Mimo helps F&B entrepreneurs pay any supplier invoice with one click and provides fast and secure access to trade credit, so you can take control of cash flow within one simple platform.

What to know more? Reach out to discover what Mimo can do for your F&B business.