In today's economy retailers have to be adept at keeping their head above water and when sales are tough to find and the dollars are not flowing in as they once were you may find yourself a little short on cash. This may sound obvious but shortage of cash is one of the leading causes of retailers declaring bankruptcy. Many successful companies can be very profitable and show good sales gains year after year but if they fail to manage their cash they can still go bankrupt.
There are two main areas to conserve cash: 1) reduce or slow the amount going out and 2) increase or speed up the amount coming in.
Improve Cash Flowing Out
One of the biggest drains on your cash reserves is having to pay for product too early before the product has a chance to sell through. Make sure to set realistic shipping dates on all orders so that the goods arrive no more than 30 days before they are expected to sell. This way you are not paying for something before you get the sales for it.
Talk to each and every vendor when placing an order about getting extended dating for larger orders. Lots of vendors are willing to extend 60 or 90 day terms if you give them a sizable order and are willing to take an earlier delivery.
Review all of your expenses especially payroll. Your staffing is one of the biggest expenses in a retail store and reviewing what your busiest days are, what times of day you need more staff and scheduling accordingly can save you thousands of dollars over time. Make sure you schedule shorter shifts to avoid having to give lunch breaks or extra coffee breaks. Most local labour laws stipulate a minimum numbers of hours before staff are entitled to a break or lunch. By keeping your shifts at or below this minimum you ensure you are only paying for work and an employees break time.
Some expenses such as certain types of marketing are often left on auto-pilot and can be costing quite a lot of money. An example is online pay per click campaigns. These often cost a business a monthly fee but should be adjusted to save dollars during slower sales periods. Postpone print ads that may have previously been booked to stretch out your marketing budget over an extended time.
Improve Cash Flowing In
To improve your incoming cash review your accounts receivables and follow-up with any customers that are delinquent and even those that are still within terms to remind them of upcoming payment due dates. A simple phone call works best and is more personal than a form letter. You would be amazed at how many businesses get paid first simply because they called and not because they would have been the first ones paid.
If you have new customers offer incentives for them to pay up front or by cash. A small discount of 2 - 3% for a cash payment is often enough to convince someone to pay now instead of taking terms or using a credit card.
If after implementing some of the above suggestions you still find yourself cash starved and are having trouble paying bills then follow these guidelines:
- Talk to your vendors - tell them your situation and ask them for a little more time. The more dialogue you have with them the better. DON"T shut down and stop answering the phone. This will not send your vendors a good message and will not help your situation.
- Speak to you bank or credit facility. While they may not be able to extend you additional credit they may be able to restructure your existing debt or offer different payment terms to help improve your cashflow situation.
- Make sure you always pay government agencies and tax remittances on time. These vendors are not negotiable and can cost you significant penalties if not paid in full on time.
