How Can Direct Sellers Solve Their Cash Flow Problems?
Does your direct selling business occasionally suffer from cash flow problems? You’re not alone.
The road to success for direct selling businesses is paved with numerous and varied challenges. One of the most difficult, but critical, is controlling cash flow. According to a recent survey by Mercator Advisory Group, 71 percent of U.S.-based direct selling businesses say that cash flow issues delay routine purchases at least 1-2 times a year. For a direct seller, a disruption in product and service purchases can create serious problems and, in severe cases, it can be critical: 81 percent of businesses that fail do so because of cash flow issues.
So why do businesses have problems controlling the amount and timing of money flowing in and out, and how can they fix it?
First, let’s look at the problems:
Possible Reasons For Cash Flow Issues:
- Overestimating sales and revenue
- Not anticipating the timing of revenue and expenses
- Not collecting receivables in a timely manner
- Having employees make purchases with their own funds
- Not having a cushion or reserve of cash for unexpected costs or loss of revenue
- Not having all of the right controls in place
Many of these issues arise from using less than optimal payment mechanisms, such as cheques or cash. Furthermore, direct sellers often have difficulty keeping personal and business finances separate, resulting in difficulty tracking payments and maintaining transparency.
The Problem With Credit
Many direct sellers rely on credit cards to facilitate purchases such as office supplies, travel, or entertainment expenses. While obtaining a company credit card can be relatively easy, it can also lead to debt, overspending, and cash flow problems. If this overspending becomes a serious issue, a business can fall behind on their payments, leading to a negative impact on the owners’ credit rating. As a result, business owners are understandably hesitant to hand over credit cards to their staff to make purchases.
The Problems With Employee-Funded Purchases
Businesses sometimes have their employees use their own cash or credit to fund purchases, which is then to be reimbursed later. Expense reports for these purchases must be created, submitted and processed, which is time consuming and cuts down on workplace productivity. It can also create tension between employer and employee if the expenses aren’t reimbursed in a timely manner, as a delay can cause interest charges or a shortfall of funds.
So What Is The Solution?
Cash flow can sometimes make or break a business, so companies need solutions that can help streamline, automate, and improve cash flow management. The answer: a prepaid card expense management solution.
Prepaid cards are a great tool to handle expenses and can also help solve issues related to the management and administration of these expenses.
How Prepaid Cards Solve Expense Payment Issues
- Cards can be provided to company owners and any employees who need to make purchases for the company.
- Prepaid cards can be used in-store and online.
- The cards can be used at any location that accepts Visa® or Mastercard®
- The prepaid card can be customized and branded with your company name and logo, increasing brand exposure and loyalty among employees who use the card.
- Prepaid cards are loaded by the employer with available funds, so credit concerns and cash flow problems are avoided, and employees don’t have to pay upfront for purchases.
- The card loads can be limited to the amount of money required to make the necessary purchases.
- Funds can automatically be loaded in real time.
- All purchase transactions are tracked automatically and include details such as the time, date, location, and merchant. This offers more transparency than other payment methods.
Thanks to prepaid expense cards, direct sellers can solve their cash flow dilemmas by gaining control over where, when, and how funds are spent, and cut down on the time (and money) wasted on administrative activities such as reporting and reimbursement.
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