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6/26/2019

Focusing on Cash Flow is Essential for Apparel Companies

The change within the fashion industry in 2019 is as varied as the designs from the industry’s biggest brands. Fortunate for companies within the industry, change creates opportunity.  As apparel companies look to be opportunistic, financial stability is critical. Many apparel companies are changing their business models in efforts to increase profits. Additionally, companies are attempting to bridge the gap between manufacturing and retailing by investing heavily in technology to integrate systems. Consistent throughout most apparel trends is the need to control cash flow.

Controlling cash flow for apparel companies

Cash flow is something that concerns companies in nearly every industry, and apparel is no exception. Most fashion companies experience ebbs and flows in sales based on seasonality, particularly brands with a specific focus like swimwear or coats. Too much inventory forces markdowns and lost profit, while too little has the potential for lost sales and customer satisfaction. 

The right balance of inventory is crucial for controlling cash flow. But understanding your typical cash flow cycle can take years, and some businesses crumble under the pressure along the way. Inventory intelligence solutions are one way companies are attempting to preserve cash flow by analyzing supply chain network data to optimize their inventory management. Working with an experienced team for factoring is another solution for apparel companies to consider.

Understanding apparel factoring

Accounts receivable factoring can provide apparel companies with working capital to run their businesses. On top of that, it offers the peace of mind that the company will get paid for credit approved and undisputed invoices – all without the operational burden and expense of managing payments  on accounts receivables. In general, here’s how apparel factoring works:
  • The factor advises if it can credit approve orders from your customer. 
  • You sell your apparel to your customer.
  • You sell your company’s receivables due from the customer to the factor
  • The factor collects payments directly from the customer and pays you for the receivables.

Helping apparel companies achieve their goals

At CIT, we have deep experience providing factoring and/or financing solutions to companies in the apparel industry. Clients of many sizes and specialties look to us for apparel factoring to help mitigate their cash flow challenges and/or customer credit risk. With our help, apparel companies can focus on their strengths: design, merchandising and sourcing the product.

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