Overcoming the Challenges of Seasonal Cashflow

Distributors in the apparel business are often caught in the middle when it comes to cash flow. You need to lock in solid orders with your retail customers so you can then place your own orders with overseas suppliers. But production and shipping times can fluctuate, especially with the additional pressures COVID-19 has put on supply chains. The pressure on your cash flow can put the brakes on your own growth plans. 

That’s where Lock Finance can help out. Lock Finance is one of New Zealand’s most experienced and innovative invoice finance operators, having helped many importers and wholesalers use working capital solutions to smooth out seasonal funding gaps. 

One long-term customer is Arnon Levy, from Fashion Marketing Limited (FML) in Wellington. He’s a sixth-generation apparel wholesaler and FML has been in business since 1997, supplying women’s clothing, footwear and accessories to retail stores across New Zealand. “I enjoy the contact with our customers and agents,” added Arnon. “It really does have a family feel to it, as the fashion industry is really quite small these days in New Zealand.” 

Arnon has been a Lock Finance customer for over 10 years, making effective use of their invoice finance solutions. He says invoice finance gives him more flexibility with his customers’ accounts, as cash flow is an issue for every business, especially those that manage stock. It also helps maintain business relationships. 

“In an industry that is challenging at the best of times, we receive a lot of support from our customers so in turn we support them. Every customer has challenging months at times and that’s where the support from their suppliers is essential to see them through.” 

Seasonality has a big impact on his business. “The main delivery windows in the clothing industry,” says Arnon. "Are late January to April for autumn/winter and July to October for spring/summer. This leaves four months out of every year that is very lean for cash flow.” 

Slow payers are a risk, triggering a domino effect that makes it harder to pay suppliers and keep the supply chain going. 

To manage this, when the FML team receives firm retail orders, these are collated and shared with Lock Finance, who draw down funds from FML’s Purchase Order Facility to pay their overseas suppliers directly. 

Once the product arrives here in New Zealand and is delivered to FML’s customers, Lock Finance draws down funds from their Invoice Finance Facility to repay the Purchase Order Facility. This also releases additional cash, equal to FML’s margin on their orders, which becomes available as working capital. Accounts receivable for FML is handled by Lock Finance so that Arnon and his team can get on with more important jobs. 

“Invoice financing means we can pay our suppliers on time and deliver to our customers on time, COVID permitting,” said Arnon. “It’s clean and, in most cases, seamless.” 

Even if you're not ordering seasonally, Lock Finance can help your business switch on the power of your unpaid invoices. With an Invoice Finance Facility, you’re able to access cash straight away, instead of waiting on your customers to pay. You can proactively focus on where your business is going, rather than sit back and wait on others.