If you’ve been struggling to turn a profit within your small business, you might be looking for tips on how to turn things around.
The truth is, there isn’t a simple recipe for success when it comes to starting and, more importantly, maintaining your own business.
In fact, many small business owners end up searching for a retail liquidation consultant to help them close their businesses.
The good news is that there are steps you can take to give your business its best chance at success.
One of the most important aspects to running a successful business is retail cash flow.
Improving your retail cash flow is essential for several your business’ financial needs, including:
- Paying debts
- Paying employees
- Paying bills to various service providers
- Meeting other unexpected expenses
This article will explore the concept of retail cash flow as well as provide tips on how to improve cash flow within your business.
Let’s get started.
What Is Retail Cash Flow?
Simply speaking, retail cash flow is the amount of money that is both coming in and going out of your business.
Money coming into your business is generated through sales, while money going out is spent on necessities, such as operating costs, purchasing new inventory, and paying yourself and your staff.
Retail cash flow is especially important to small and medium sized business owners.
Cash flow problems can put extra stress on small businesses and ultimately contribute to them failing.
And while sometimes retail stores close, it’s nice to hire a retail store closing sale consultant because it’s time to retire from your retail store, not because of stress.
Therefore, it’s a good idea to create a positive cash flow for your business.
A positive cash flow occurs when there is more money coming into your business than going out.
Most retail stores will take at least a few years to be able to generate a positive cash flow – that’s okay, it’s to be expected.
What’s The Difference Between Retail Cash Flow Vs Profit?
While retail cash flow and profit are both important to your business, they aren’t the same thing.
Your profit is the amount of money left over after expenses have been paid, whereas your cash flow describes the flow of money going in and out of your business.
It’s possible to have high profits but experience a negative cash flow due to high expenses, expansions, and business growth.
On the other hand, it’s also possible to have a positive cash flow while struggling to make a profit.
Both cash flow and profit are important indicators of the health of your business to potential lenders or investors.
How To Improve Your Retail Cash Flow
Now that you have a general understanding of retail cash flow, let’s take a look at some strategies for improving it.
1. Manage Your Inventory More Effectively
Many retail stores run into a common problem – an ineffective retail store inventory management strategy.
They purchase more inventory than they can sell, and that inventory ends up tying up a significant portion of the business’ money.
That might be because you overestimated the demand for said inventory, or you purchased it on discount hoping it would increase your overall profit margins.
Does this scenario sound familiar?
Regardless, you’re left holding the bag with a bunch of aged inventory that’s tying up your cash.
There are several options for how to liquidate your aged inventory, including bundling it with other, more popular products, remerchandising your store, holding a liquidation sale, or giving it away as part of a promotion.
2. Check Your Maintenance Costs
When calculating your retail cashflow, its important to take your business’ maintenance costs into consideration.
Your maintenance costs include services such as exterior cleaning and parking lot maintenance.
It’s crucial that you know exactly what your costs are to minimize your costs.
If your lease permits, consider conducting an audit of your maintenance costs to eliminate excessive fees.
3. Make Sure Your POS System Is Right For Your Store
Your point of sales, or POS, system can help influence your retail cash flow.
POS systems process all of your sale transactions, but that’s certainly not all they can do.
A good POS system can also track inventory and identify potential problems before they negatively affect your cash flow.
For that reason, investing in a good POS system can make a huge difference for your business.
4. Review The Credit Card Processing Fees You’re Paying
Similarly, reviewing your credit card processing fees can also help your retail cash flow.
Typically, credit companies charge a fee for every credit transaction at your business.
While these fees are small, they can add up fast.
Many companies offer the opportunity to negotiate slightly lower fees.
If your current company doesn’t offer this service, shop around for one who does, or look at membership benefits with some supporting organizations.
If you’re a member of a professional organization, they may have negotiated a better rate with certain payment processors for their members.
In Canada here are a few organizations to look into:
You want to be able to track exactly where your money is going in order to maximize your business’ potential.
You can also encourage your customers to use cash or debit rather than credit – debit tends to have lower fees, and of course cash has next to no fees, but it does take time to go to the bank to make your deposit.
But be careful! Don’t discourage people too much from paying with a credit card.
After all, a sale with a processing fee is better than no sale at all.
5. Make Sure To Have A Cash Reserve On Hand
Finally, it’s important to ensure a cash reserve is available for those unexpected rainy days.
If the last few years has taught business owners anything its that the unexpected can happen and businesses must be prepared for when it does.
A cash reserve or a pre negotiated line of credit can be useful in case of urgent expenses and allows you to manage for slow seasons.
Your cash reserve is a lifeline for your business, so ensure that you have one.
Contact Silverman Consulting And Retail Services
Does nothing seem to be helping your business?
Have you already tried all these strategies and are still struggling?
Or are you simply done with the stresses of a brick and mortar store in today’s new retail world?
Perhaps it’s a good time to look at your options.
At Silverman Consulting and Retail Services, our qualified staff can help make closing your business as easy and stress free as possible.
Contact Silverman Consulting and Retail Services today to get started.
Silverman Consulting & Retail Services229 Yonge St suite 400,
Toronto, ON M5B 1N9, Canada
1 (888) 955-1069