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Maximising cash flow for retail businesses

To be successful in the apparel business wholesale and distribution requires a mix of passion, instinct, courage and a strong balance sheet with consistent cash flow.

Accessibility to continuous cashflow is critical as it enables the business to re-invest the money into ordering more product and packaging from suppliers and cover increasing wages to meet larger retail orders.

Securing supply from overseas requires financial commitment in the form of a deposit or securing a letter of credit. Both require trading history and a commitment of funds.

But, production and shipping times can fluctuate. This increases pressure on cash flow which can put the brakes on your own growth plans. So how can apparel businesses keep cash flow going while you’re waiting for the goods?

Fashion Marketing Limited (FML) has been a long-term customer supplying women’s clothing, footwear and accessories to retail stores across New Zealand.

FML's suite of fashion brands grown through innovative cash flow solutions

Arnon Levy, their managing director and a sixth-generation apparel wholesaler, has been a Lock Finance customer for over 10 years, making effective use of our invoice finance solutions. Especially to support retailers create momentum in the market, by extending lines of credit without compromising FML’s cash flow.

“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.”

Slow payers are a risk, that can make it harder to pay suppliers and keep the supply chain going.

To manage this, when the FML team uses the Purchase Order facility and Invoice Finance facility. When FML receives firm retail orders, they are collated and submitted to their Lock Finance Purchase Order facility.

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,” says Arnon. “It’s clean and, in most cases, seamless.”

Switching on the power of their unpaid invoices allows FML to proactively focus on where their business is going, and take control of it. Working with our accounts receivable team has also helped them understand how they can improve their margin by improving trading terms.