The decisions you make about financial management and scaling for growth in the wake of a hit product could lead to success – or losing control of your business. Here are some suggestions to help successfully manage your sudden growth in sales.
Your dream has come true – you suddenly have a hit product on your hands. Your sales and the number of customers you deal with suddenly hockey stick. More sales and more customers also bring a need for more capital to fund both inventory and the expanded operational infrastructure. Not to mention, you’ll also need to better understand your new customers to ensure your invoices will be paid.
With rapid growth from a hit product, you need a service-centric firm to take some of the financial and operational burden off your shoulders-- so you can focus on growing the business. A company like CIT Commercial Services (CIT) can serve as an extension of your credit and operations department and applies its working capital financing expertise to ensuring clients can capitalize on every sales opportunity.
Nothing Succeeds like Success (If You Manage It Well)
While it’s important to have inventories ready to ship, it can also mean your working capital is tied up in inventory and unavailable for other investments. Even once your inventories are shipped to customers, you still have to wait thirty, sixty or ninety days for accounts receivable to mature and then hope that your customers will pay on time.
Your first instinct may be to seek a bank loan or line of credit, to reach out to your original or new investors, or some other conventional method that may have you dealing with creditors at less than a position of strength. There is a sustainable financing alternative, to borrow against your accounts receivable or existing inventory. By freeing up working capital in this manner, you can have the money needed to pay your bills and your employees as well as to buy materials to replenish inventory. We’ve seen how a companies’ ability to borrow from CIT has not only helped them get through sales surges as the result of a hit product, but also positioned them for long term growth.
Checking Expansion Expenses
OK–once you've cost-effectively financed your hit product inventory, you may look to add staff to handle all the additional accounts receivable management and credit risk activity. Increasing staff might seem necessary during a boom period but when sales slow down or your service/product mix changes, extra sets of hands become extra fixed costs. Often, the best solution is to outsource those functions to an accounts receivable management company like CIT that has the scale and experience to handle large sales volumes more efficiently.
For example, CIT has credit intelligence on thousands of retailers and wholesalers and can act as an extension of your credit team. CIT can also take many of the administratively burdensome tasks away from your business, including receiving payments, applying them to the invoices and reconciling retailer deductions. CIT can also perform collection efforts on late paying customers. As an added benefit, CIT offers credit protection that will pay you on undisputed invoices if the credit-approved customer is financially unable to pay. In sum, let the army of extensively trained, dedicated credit and operations professionals from CIT handle the cumbersome work for you, so your in-house accounts receivable team can focus on increasing revenues by reducing charge backs and pursuing recoveries.
CIT understands your consumer electronics business and recognizes what it takes for a company to amplify its rapid growth. Not only can CIT help you unlock working capital from inventory and accounts receivable, CIT can act as an extension of your credit and operations department to decrease operating costs and increase your bottom line.
Click here to see more information on consumer electronics industry operational finance best practices on the CE Financial Strategies Center.
Joel is a business development officer at CIT Commercial Services. With over 18 years’ experience, Joel has structured many financing arrangements for companies in the consumer products space, including consumer electronics, apparel, textiles, and housewares. Joel has a deep understanding of the retail supply chain, as well as the retailers to whom his clients sell.