How can Builders Merchants Improve Cash Flow?

In the supply chain, builders merchants play a vital role — supplying products in bulk to the construction industry and in smaller quantities to tradespeople and contractors. But the landscape is shifting.

Builders merchants are under growing pressure from large retailers and home improvement chains who benefit from stronger brand recognition and bigger marketing budgets. Amid tight margins and fierce competition, one challenge remains constant and critical: improving cash flow.

The Cash Flow Challenge in the Builders Merchant Sector

Builders merchants often purchase stock well in advance of receiving customer payments. This delay between outlay and income can create serious strain on cash flow. And while managing margins is essential, there's often a trade-off: early payment discounts versus extended credit terms. In simple terms, faster payments might mean better pricing — but it’s rarely that straightforward.

One of the most complex areas impacting cash flow is supplier rebates. These incentive programs, while valuable for increasing loyalty and sales, often withhold discounts until rebates are calculated and processed. This delay can choke cash flow, especially if builders merchants rely on manual systems like spreadsheets to manage rebate claims.

Don’t Rely on Spreadsheets to Improve Cash Flow

At Enable, we’ve worked with many builders merchants who still rely heavily on spreadsheets for rebate management. Here’s why that’s a problem:

• Fragmented data: Builders merchants often pull rebate information from multiple sources and stakeholders. When spreadsheets are scattered across teams, accuracy and timeliness suffer.
• Prone to error: One missed transaction or unit conversion mistake can mean missing a higher rebate tier — which can directly impact profit.
• Complex units of measure: Receiving materials by the pallet, selling by the bag, and claiming rebates by the ton? That’s common — and a nightmare in spreadsheets.
• Lack of real-time visibility: Without regular consolidation, there’s no live check on performance against rebate thresholds. Builders merchants risk leaving money on the table.
• Time-consuming audits: If a rebate is disputed, builders merchants using spreadsheets often scramble to pull together evidence — wasting hours verifying calculations and chasing approvals.

In short, spreadsheets might feel familiar, but they’re holding builders merchants back from improving cash flow and protecting their profit.

Speed Up Rebate Claims to Free Up Cash

Missed or delayed rebate claims directly hurt the bottom line — especially for builders merchants whose rebates often equal their entire profit margin. Even if a rebate isn’t missed, the manual effort to calculate and submit claims can take days or weeks. This delay ties up cash and may result in unnecessary borrowing costs. Imagine if your team could prepare a rebate claim within hours, instead of weeks. You could unlock cash faster, reduce reliance on credit, and strengthen your working capital position. Sadly, builders merchants using spreadsheets rarely have this agility. In fact, we’ve found that 4% of available rebate value goes unclaimed due to manual rebate processes. That’s lost profit — and lost cash flow.

Forecasting for Better Cash Flow Planning

Cash flow forecasting is essential for builders merchants to make informed financial decisions. By understanding historical rebate income and seasonal sales cycles, you can better predict incoming cash and plan expenses accordingly.

But again, if rebate data is locked in spreadsheets, forecasting becomes guesswork. Builders merchants need real-time, reliable data to make accurate predictions and improve cash flow with confidence.

Negotiate Better Payment Terms with Suppliers and Customers

One of the most effective ways for builders merchants to improve cash flow is by negotiating favorable payment terms on both sides of the ledger. On the supplier side, aim for extended payment terms such as 60 or even 90 days, which allows you to hold onto cash longer and align outflows more closely with when you get paid. On the customer side, consider incentivizing early payments by offering small discounts for paying invoices promptly — for example, a 1–2% discount for payment within 10 days. For customers who regularly delay payments, tightening credit controls or reducing credit limits can help protect your cash position. By rebalancing terms across the supply chain, builders merchants can significantly reduce cash flow pressure without sacrificing sales.

Optimize Inventory Management to Free Up Working Capital

Holding excess inventory ties up cash that could be used elsewhere in the business. Builders merchants often carry a wide range of stock — from fast-moving essentials to niche specialty items — and poor inventory control can lead to overstocking or obsolescence. By using inventory management systems with forecasting capabilities, merchants can align stock levels with actual demand. This means ordering the right quantity at the right time, reducing storage costs and freeing up working capital. Additionally, identifying and clearing slow-moving or obsolete stock — even at discounted prices — can generate quick cash and make room for more profitable product lines. Effective inventory optimization not only improves cash flow but also helps maintain a lean, responsive supply chain.

Offer Tiered Pricing or Product Bundles to Increase Upfront Payments

Builders merchants can improve cash flow by encouraging larger, more frequent purchases through tiered pricing structures and product bundles. Offering volume-based discounts motivates customers to consolidate orders, which increases revenue per transaction and may result in quicker payments. Product bundles — such as pairing fasteners with timber or adhesives with drywall — can also raise the average order value while adding convenience for the buyer. In many cases, these strategies can be tied to prepaid or upfront payment incentives, further accelerating cash inflow. When implemented correctly, tiered pricing and bundling not only improve working capital but also help merchants stand out in a competitive market with added value for customers.

Implement a Rebate Management System Built for Builders Merchants

While many ERP systems offer contract or rebate modules, they often fall short when it comes to handling the complex rebate structures used by builders merchants.

That’s why many of our customers come to Enable. Our purpose-built rebate management software helps builders merchants improve cash flow by:

• Accurately modeling all types of rebate agreements — whether brand, customer, or supplier specific.
• Consolidating real-time purchase and sales data to automate rebate calculations.
• Alerting users when discounts are at risk of being missed.
• Generating audit-ready invoices to submit claims faster and unlock cash sooner.

Ready to Improve Your Cash Flow?

In a competitive market, builders merchants can’t afford to let manual processes erode their profitability. With the right rebate management system, you can streamline claims, recover lost rebate revenue, and improve your cash flow position — all while maintaining strong supplier relationships.

Discover how Enable helps builders merchants thrive — read our full guide on rebate management for the building industry.