You have your business plan in place, which includes the industries in which you wish to operate, your strengths, weakness, opportunities and threats and an overview of the financials. How will you put the plan into action?
There are several unique considerations to make if you are running a trading business:
You will need to think carefully about how you source and ship your goods, and the kind of resources you need. You’ll usually need storage space, for which you will need premises as well as staff, equipment and insurance. You’ll also need to link up your logistics with your accounts system, to ensure you keep track of stock, invoices and cash flow.
Supply and demand
Getting this right is a delicate balancing act that requires regular communication with both customers and suppliers. You’ll also need to spot trends in demand. This requires an expert’s view of your industry to predict trends and new product lines which your customers may demand.
Being a supplier relies on a financial commitment up front, and then a continuous process of investing in the right stock at the best times. Regularly looking at your cash flow, and forecasting too, will help you predict busier periods and times when it is wise to invest in stock. A good view of your cash flow will allow you to set payment terms with your customers to ensure they fit with your business.
This ties in with supply and demand and also cash flow – these three elements will help you predict trends and then apply them to your own business. Become an expert in your industry, talk to your suppliers, network and discover the niches and read the industry press to predict what is to come.
Sale of Goods Act
Rules applies whether you are sourcing locally and internationally and it is important to brush up on these to ensure you operate properly. The Sale of Goods Act is a key consideration – when dealing with customers you must provide them with all essential information relating to their order. This includes description of goods, prices, taxes, delivery and any contract conditions. They must also be able to contact you easily with queries or for refunds after their order has been fulfilled.
For sourcing goods overseas you must be aware of rules relating to VAT, import duty, and licences you may need. The GOV.UK website has a guide to importing.
Insuring your stock
Your business centres around the stock that you source and supply for your customers, which means it should be protected. Professional indemnity and public liability insurance protects your stock in transit (from supplier and to customer) and in storage too. This also provides a reassurance to you and your customers should something happen.
Resources available for trading businesses
UKTI Passport to Export
The UKTI itself is a valuable resource for any business looking to do business outside of the UK, but they also have specific services for import/exporters. The UKTI Passport to Export helps assess SMEs for readiness for international trade, providing training services, planning and support. Find out more about Passport to Export.
Freight forwarding agents
Many trading businesses use freight forwarding agents, which makes shipping in and out of the UK easier to manage. They take care of the shipping and packing as well as import duty and taxes for you – and you just need to pay the sum in one invoice. This does cost more but they will ensure you stick to all the rules and pay everything that is required of you.
Industry bodies and trade associations
There are specific bodies for each industry that can help you with wholesaling goods – such as the Flower Wholesale Trade Association and Electrical Distributors Association. These kinds of bodies offer specialised industry-specific training, resources and support for businesses large and small. Trading Standards can also help you with training and support, as well as dealing with customers.
Managing accounts for a small trading business
As a wholesaler or trader you’ll refer to your accounts almost every day in relation to quoting, invoices and suppliers – so it is really important to keep them organised. There are several areas to consider when organising your accounts:
Help your customers quickly come to a decision by easily generating quotes for goods. If you are a ‘middle man’ this will be something you do a lot so you’ll need to have a template to hand which you can easily customise and send across. Sage One allows you to create a professional branded template that you can use again and again.
Invoicing and payments
Keep your cash flow healthy by invoicing as soon as you can. Sage One invoices can be generated just as quickly as a quote, and can also be linked to a previous estimate too. They can also include an online payment link for your customer to use, saving you both time sending and matching up bank transfers.
Reporting and cash flow
As we mentioned earlier, cash flow is the centre of your business, and will help you to operate efficiently. Getting into the habit of regularly analysing reports will help you keep on top of outstanding invoices, debtors and profit and loss. Sage One lets you create simple, customisable reports that can be emailed to you at whatever frequency you require.