But paying for these in bulk means going into negative cash flow for much of the year. Anika's mentor suggests forecasting the expected costs and sales to see if it makes financial sense in the long run.
Together they work out a monthly forecast to see the likely peaks and troughs in her free cash flow. If it all balances out over the year, Anika will feel comfortable with making the switch.
The forecast shows her free cash flow is negative for five months of the year as Anika waits for fastenings to arrive from India, and then sew them into her dresses. But towards the end of each season, it’s positive as the finished dresses are sold.
Negative free cash flow is a problem if it’s unexpected. But in Anika’s case, it’s planned and part of her strategy to improve her profit margins. Her mentor recommends she regularly checks her financial figures to make sure the plan is on track.