Invoice finance – a must have for FMCG suppliers

Contracts to supply the Fast-Moving Consumer Goods (FMCG) market can be highly lucrative for SMEs, leading to significant expansion opportunities and a long-term income stream. However, the reality of being a small cog in a very large wheel can sometimes present challenges for smaller operators. Invoice finance is an ideal tool for SME suppliers and producers, delivering cash flow certainty and equipping businesses with a stable platform from which to grow.

The FMCG market in Australia is worth $208 billion dollars with food, beverage and consumer products the largest manufacturing industry in the country. New Zealand is a major food and beverage producer and exporter, with the industry accounting for 46 per cent of all goods and services exports. SMEs in the sector are diverse, ranging from larger players producing essentials at scale to the very niche.  

The goal for any business is to deliver their products or services without putting stress on their operational capabilities or cash flow. To truly reap the rewards of supplying to the FMCG sector SME businesses should ensure that a stringent due diligence process is completed upfront to establish a contract that is as strategically favourable to them as possible.

Maximising your FMCG opportunity 

The FMCG category is constantly evolving in its attempt to stay ahead of the game, anticipate customer behaviour and deliver. This kind of strategic forward focus should shape the growth strategies of smaller operators too – the next innovative or desirable product that consumers just can’t do without may be yours!

FMCG companies are increasingly seeing their suppliers not just as vendors but as key assets helping to shape their business and goals. SME suppliers and producers have an important role to play and should feel empowered at the negotiating table in securing the strongest outcome for their business. Here are some strategic steps that may assist SMEs to mitigate risks for a successful partnership with their larger clients:

Check your margins 

Make sure you have done your financial due diligence upfront to ensure not only that you can deliver, but also make a profit. Consider too how you will allow for inflation pressures and supply issues that have the potential to affect the price (or appeal) of your product.

Have a cash flow management plan 

Invoice finance is an ideal solution for businesses scaling up production to meet the demands of a larger client by giving them access to their own funds sooner, smoothing out cash flow and ensuring operational costs are met. Steady cash flow delivers a strong foundation from which to build.

Know your contract inside and out 

Many businesses do not spend enough time upfront understanding their contract or negotiating terms. Review the payment terms and ensure that they are workable for your business. Contracts are binding and unfavourable terms can severely impact the smaller operator if things go wrong.  

Check your capacity 

Ensure you can fulfil your existing (as well as your new) obligations. Make sure you consider everything right down your supply chain from staff and equipment, through to raw materials and energy costs. Can you access everything you need to meet the terms of your new contract and manage your existing workflow?

Put ‘future proofing’ safeguards in place

Look for ways to lower costs, reduce disruptions and build resilient supply chains to your operations to avoid losing competitiveness. Invest in digital automation to take the pressure off, maximise your staff retention strategies and talent pipelines.

Don’t over promise 

Stick to what you know you can deliver on. Don’t go beyond your core competencies just to win the business – particularly in the current climate with supply chain disruption, higher raw materials costs, the impact of high inflation and the ongoing fall out of COVID 19 impacting capabilities.

FMCG opportunities

There are several factors currently at play in the FMCG sector. Consumers are chasing value, driven by rising inflation and are prepared to shop around for the best price both online and offline. The digital advances of the past two years are delivering an increasingly omnichannel experience with multiple brand touchpoints, better targeting and more tailored marketing. Sustainability and health, as well as buying ‘onshore’ and ‘in stock’ products to avoid supply issues remain key drivers in shaping purchasing decisions.  

As the FMCG sector seeks to capitalise on trends and pursue growth, SME suppliers can follow suit. A strong, strategic outlook underpinned by a solid cash flow position and a resilient operation provides a firm foundation for growth. SMEs can enjoy the benefits of increased revenue, a steady income stream, further expansion opportunities and enhanced credibility that working with large FMCG companies can bring.

Invoice finance supporting your business 

One of the main reasons businesses use invoice finance is to assist them maintain steady cash flow during periods of growth. This kind of cash flow surety is ideal for suppliers to the FMCG or retail grocery market who may need to scale up quickly to manufacture and deliver their product.

An invoice finance facility gives you access to the funds from your own invoices as soon as they are approved.  This means that rather than servicing a debt, you may find you are in better control of your financial situation.  There are no monthly fees or lock in contracts, and you can use the facility as little or as much as you need to.

To find out more about how invoice finance can support your business sustain and grow.

Read more about risks and benefits of landing the big fish here