Cash Flow: The Lifeblood of Your Business

The lifeblood of every business, no matter what you sell, make, or the services you offer, is cash. Without it you cannot buy inventory, pay employees, advertise or even keep a roof over your head or the lights on. But how do you manage your cash flow and how do you ensure you have enough of it when you need it? These are questions many retailers stay up late at night worrying about, especially this time of the year.

If you practice some simple cash flow management techniques, you too can start getting a few more restful hours of sleep at night.

Manage Your Accounts Receivables
Your accounts receivables is the money owed to your company, from customers or credit companies. While most retailers do not extend their own credit to many customers unless you know them well, then your biggest outstanding account receivable number would be from the credit card companies you work with. If it seems the time between you receiving the money from them and the time the purchase was made is too long, review your agreement. Shop around for better deals or simply renegotiate your terms, if possible. That is your money and your store needs it – why let it sit in someone else’s account collecting interest for them when it could be providing inventory for you? The better you manage and understand this asset, the better equipped your business will be with money.

Manage Your Accounts Payables
Your payables may always seem to be larger than your receivables, but if you’re in business for any length of time, this isn’t the case. Stay up to date on your bills and avoid any and all late fees. If creditors or vendors offer you an incentive to pay early, weigh that option against what it will mean to keep that money in your account an extra few days or weeks. Could you do more with it than the money you’ll save by paying early? Only you can decide that. Look closely at each option and make each decision an individual one versus a blanket decision to pay all bills early.

Managing your inventory to keep the right amount of goods on hand at the time is always a juggling act. Who knows what the next must-have product will be, and how quickly it will sell, and which products will be better at collecting dust on your shelves than making the cash registers ring? While many suppliers offer discounts when you buy in bulk or pre-pay with your order, you are putting your business at risk each time. Risk is good when it pays off, but it hurts when it doesn’t. Weigh your options carefully on risky deals and look at past year’s sales to help you gauge what your business should be like in the coming weeks. Keeping your inventory in check will help keep you out of the red.

The markups on most fishing tackle are slim and the profit margins cannot be played with that much. Some items have more room than others to play with. Buying in bulk and at shows to receive discounts always help. Remember to factor in lost monies on each product for damaged goods or loss. See what your competition is selling the same goods for and remain competitive, but never try to price gouge or lose your shirt just to make a sale. Every time you do either of those, you risk your reputation.

Cutting Waste
The best way to ensure cash in your bank and not in someone else’s is to cut as much waste as possible. Sometimes this costs more up front but can save you down the road. How old are your heating and air conditioning systems – can you install a more cost effective system? What areas of your store do you feel you are losing money on? Is there a product line or segment of your store that you have thought about getting rid of but haven’t yet? Maybe this offseason is the time to explore that option. Get rid of the waste or find a way to make it work. No retailer can afford to lose money, especially if the loss is incurred by laziness on his or her part.

Look at your staff – are there ways to better utilize their time, cut hours when you know you will be slow and either reschedule them when you are busier to ensure better customer service or just leave them unassigned? What hours can you lend a hand to keep one or two employees off the books and keep cash in your pocket? Finding the little areas in your store to trim the fat will add up over time, you just need to take the time to find them.

What do you do in your store to help ensure cash flow throughout the year? Were there times when you felt like you would never break even? If so, what did you do to change that? Share your thoughts with us all on our Facebook page or in our LinkedIn group and see what other retailers are thinking.