So how do businesses at different stages of their growth and maturity cycles handle sales and payments challenges? We asked a wide range of manufacturing and producing businesses to give us some insight into the barriers they come up against.
Are you doing enough to combat new sales management challenges as your business grows?
Growing businesses have growing sales operations, and that makes tracking payments complicated. As your sales revenue increases, you could find that handling a larger number of transactions becomes challenging. But it’s a challenge that paperless processes are increasingly providing a solution for. A finance and purchasing manager in a mid-market manufacturer of logistics equipment told us, “We have removed paper from our sales and service process. We are using tablets to process all of our business transactions.” Switching your processes from paper-based to device-based helps speed up the time it takes from order to cash for the business, and even mitigates operational risk by reducing errors.
If your business is in a period of growth, the stress on net working capital increases as spend on production demand outpaces money coming in from sales. As the CFO of a mid-market clothing manufacturer said, “Despite the desire from other senior stakeholders to pursue growth, we have to balance our stock commitments and supply chain capacity with demand.”
During the early stages of growth, you might experience a strain on cash flow too – and, potentially, an inability to meet short-term financial requirements – as you work to meet supply with demand in the start-up phase.
Could you be doing more to prepare for uncertainty as you expand internationally?
It’s not just an increased volume and complexity of sales payments that is a challenge caused by your business growing in size. Starting to trade internationally is another milestone in growth that comes with sales and payments risks. Expanding into new markets increases the opportunity for your business, but selling to new customers – especially internationally – presents its own set of challenges.
More purchases from and sales to international business customers increases foreign exchange, and brings performance and payment risk, too. A director in a consumer goods manufacturing and retail business said: “We’re always trying to mitigate the foreign exchange rates we’re exposed to as a mid-size importer and exporter. I need to minimise my costs because my competitors are global suppliers who have a more favourable tax environment.”
Growth also brings the risk of late or non-payment from customers. This is especially the case when you expand into new markets, with new customers whose creditworthiness you haven’t yet had the chance to evaluate.
Are you flexible enough to maximise value from sales?
But it’s not just new businesses in the early stages of growth that face challenges in sales and payments. Even as an established business, you might find yourself up against new challenges in today’s changeable trading environment. Long payment terms from buyers with strong bargaining power can create the need to release cash from receivables. That kind of situation can change at short notice in the globally competitive marketplace, and large businesses are having to be more flexible than ever to secure sales.
Larger businesses tend to be less agile than their smaller counterparts. As such, they’re less able to respond quickly to new threats or opportunities. Smaller, more agile businesses can make the most of flexibility in their manufacturing operations to go after new sales and distribution channels. The director of a consumer goods manufacturing and retail business said: “Our buyers used to be 90% trade, with 10% through direct consumer sales over the internet. Now, that ratio has switched.”
When it comes to agility, it’s beneficial for larger businesses to take a leaf out of the book of smaller businesses and look at how they continually seek out new sales channel opportunities.
Are you investing enough in customer relationships as your business matures?
A large manufacturer may have found success as a producer of highly specialised products with a tightly defined set of buyers. Stable, long-term customer relationships become increasingly important when it comes to maintaining a healthy sales pipeline as your business passes peak growth and reaches maturity.
You can strengthen your customer relationships by adding value to their businesses – for instance, by investing in more sustainable processes or shared technology. As a supplier, challenge yourself on how you can innovate with your buyer to make your relationship work more effectively.
When it comes to significant, long-term customers, it’s important to make sure your business is investing in the relationship to open up communication and shared visibility. The finance director of a large manufacturing corporation said: “We have a centralised business development monitoring system to create visibility of sales pipeline and order backlog. It’s a shared responsibility to look after customer relationships.”
Effectively managing your relationships with your customers is one of the best ways of maximising sales stability, improving transparency and addressing issues that affect your competitiveness. And that’s a way to de-risk your sales process that’s just as valid for growing manufacturers as it is for large, mature businesses.
Are you doing enough to support the global sales opportunities?
At any stage of growth, there are experiences from other manufacturers that you can draw on and learn from that will help you on your own journey.
Expanding your business into new growth markets is essential for increasing revenues and market share. Ask yourself: are you embracing technology to streamline your sales and payment processes as you grow? Are you protecting your sales from currency fluctuation and bad customer credit? Are you focused on building trust and rapport with new customers? And are you agile enough to respond to new sales opportunities as soon as they arise?