Retail Managers! 2021 is almost ending and now it’s the time to get your financial home in order to have the most profitable cash flow in your business and stress-free year possible!
What is Cash Flow?
Cash flow is the amount that is going in and out of your business. Cash flow begins with two things: money coming in for your customers to make purchases and money going out through business expenses such as your inventory, staffing costs, operating bills, etc.
Healthy cash flow is when you have more money flowing in, while the opposite scenario — that is, more expenses and not enough income — puts you in a cash crunch.
Cash management tips in times of recession, recession, or lockdown (e.g., COVID-19)
Cash flow management becomes more complicated when money is not flowing as before. This often happens during an economic downturn or in situations when you are forced to close your operations.
Here are five cash flow tips:
Plan for the rest of the year.
This simple piece of advice is the best advice you’ll ever get and bears repeating. Similar to your marketing and merchandising, no matter how well prepared you are about the year ahead, you should now make your plans and develop contingencies for any problems or emergencies. Recessions, Weather issues, vendors going out of business can all ruin your plans. There are simple options, so you’re not overpaying to ship because you lack best-sellers.
Reduction in labor cost.
With COVID-19, many retailers found that they were paying overtime for younger employees. Now is an excellent time for small retailers to see if you can turn some of the better temps into regular employees and get rid of some of the deadwood in your stores—all of which will improve your future cash flow.
Prepare for tax season.
While preparing your paperwork for the past year is essential, there is no better time than now to prepare for the next. The proper documentation for your accountant and having the money available to pay your taxes will shrink your tax burden and your accounting fees. If you’ve had a good year, profit-wise, savings may seem irrelevant, but it all adds up. Furthermore, if you missed quarterly payments last year, pay them now and avoid further tax penalties.
Any building improvements or significant capital expenditures, such as a new POS system, mobile payment integration, or new fixtures, should be spent as early in the new year as possible so that you can get the maximum amount of depreciation expense for the year.
Truth be told, you should have thought about this issue before the end of last year. Still, if you had a great holiday season in terms of sales, you should look to expand your retail business, and now is the time. Make a wish list, price it, schedule it when you have the cash, get lease options, and go during the gloom of winter. Yes, we are getting over the pandemic, but be prepared for summer consumer demand.
Invest in bargaining. Your distributors and manufacturers have the same concerns as retailers about leftover merchandise after the crazy 2020. Even better, they might have much more to offer than the average store owner. Some prudent investments in sales items can reap the rewards and enhance your cash flow pretty quickly depending on your business. Just one caveat – only get what you’re already selling – don’t experiment with closeouts. And no holiday merchandise!
The tips we mentioned in this blog can generate significant and timely cash flow benefits for your retail business, but only if you apply them in a careful, well-thought-out manner. Where a cash outlay is a must, don’t throw money away, such as adding a new product line in hopes of a growing business – it has its limits.
Instead, calculate where your best return is and deploy your money there. In some areas, deductions need to be made—employees, lines that don’t sell, non-responsive vendors—so act quickly and appropriately.