A guide to managing logistics and accounts for a small trading business

A small trading business is all about operations – sourcing goods from your suppliers and matching them to the market. Having well-organised logistics and accounts will help you manage supply and demand in an efficient and profitable way.

If you’re running a small trading business or thinking about running one in the future, read this article for advice on dealing with cash flow, overseeing logistics, how small business software can help, how to manage your accounts and more.

What is a trading business?

Generally, a trading business is defined as one that sources any kind of goods for resale locally, nationally or internationally – for example, an importer/exporter, market trader or wholesaler.

What does a small trading business need to consider?

You have your business plan in place, which includes the industries you wish to operate in, but how will you put it into action? There are several considerations to make if you are running a trading business.

Logistics

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 which, as well as needing premises, requires 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

Supply and demand 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 that your customers may want.

Cash flow

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 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.

Market research

Market research ties in with supply and demand and cash flow – these three elements will help you predict trends and apply them to your own business.

Become an expert in your industry by talking to your suppliers, networking and discovering the relevant niches, and reading the industry press to predict what is to come.

Financial regulations

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 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 for small trading businesses

Department of International Trade

The Department for International Trade (DIT) is a valuable resource for any company looking to do business outside of the UK.

The DIT, which is a UK government agency, can offer your business advice and support on exporting, and help when it comes to connecting with international buyers of your goods.

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 types of bodies offer specialised industry-specific training, resources and support for businesses large and small.

The Chartered Trading Standards Institute (CTSI) 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.

Quoting

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.

Invoicing, payments and cash flow

Keep your cash flow healthy by invoicing as soon as you can. Late payments is one of the key issues that businesses face – and you don’t want to spend a lot of your time chasing invoices.

Other things you need to do include:

• Making sure your payment terms are clearly stated on your invoices
• Checking all of the details are correct on your invoices
• Keeping in contact with your customers alongside all stages of the invoicing process
• If you do need to recover an unpaid invoice, do so quickly to avoid minimal disruption to your cash flow.

Reporting

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.

Using accounting software to manage your accounts

Good accounting software will help you when it comes to dealing with quoting, invoicing, getting paid on time, managing your cash flow and reporting.

Using the right solution could allow you to create a professional branded template that you can use again and again for your quoting.

You can use your accounting software to generate invoices. And if it includes an online payment link for your customer to use, this will save you both time and increase the chance of your business getting paid on time.

With cash flow being an important part of your small trading business, use your software for forecasting so you can plan ahead and estimate how much money your business will have or require in the future.

And when it comes to reporting, a good accounting software solution will let you create simple, customisable reports that can be emailed to you at whatever frequency you require.

Editor’s note: This article was first published in September 2018 and has been updated for relevance.