Poor cash-flow management is causing more business failures today than ever before. Therefore, it is essential to practice good retail management by accelerating your cash inflow, delaying your cash outflow, and minimising your expenses. Here are some tips that will make it easier for you to achieve better management of your small retail business.
Awareness of cash management
As a small retailer, you don’t have to have a degree in finance to run your business well. But you have to understand the basics of income and costs that affect your business. Start with making a proper business plan with a realistic budget including everything: inventory, rent, payroll, and taxes. Then you balance these payments with incoming revenue and sales cycles. Revise it as circumstances change; retail management is an ongoing process. You can use Excel, or you can invest in a good technical accounting software. There are many available on the market that create graphs of your progress against the budget, for example, Xero and Kashflow.
Focus on cash flow instead of profit
Maximising your retail cash flow is not the same thing as maximising sales. In fact, if you only try to maximise sales, your money will quickly disappear. When cash is flowing through the store, the business is viable. When money is running out of the shop, it is quickly dead. Many small stores do not make it past the first year due to low cash flow. One way of getting better control is to set cash flow targets in line with the financial plans of your business. Produce a cash flow forecast on a monthly basis, so you can identify the gaps between income and expenses and take steps to control any shortfall that might occur.
Slide the debt and bill earlier
It is all about having as much cash in the company as possible. Therefore, you should pay the bills as close to the due date as possible and invoice your customers as quickly as possible.
Balance your inventory
Having too much inventory in moments of little cash is a scary business. You may need to sell goods that you have had stocked a long time at a substantially reduced price. Therefore, stay focused on your core business. Invest only in inventory that contributes to at least 80% of your sales. As a small retailer, you cannot meet your customers’ every request directly in the store. But you can special order whenever possible. Also, try to buy stock as close to the time of sale as possible, and always revise and update your sales forecast before the next purchase. To have control of your inventory is an ongoing process, but in time, you will learn to master it in a satisfactory manner.
Buy a cash management system
Managing cash in stores remains a major challenge for retailers. Cash is expensive to process and to secure. Also, when money is trapped in registers or tills, you cannot use it. Investing in a cash management system is one way you can improve the efficiency and security associated with handling cash. The system will help you to manage daily sales. You do not have to worry about miscalculating or be afraid of thefts. You also save enormous amounts of time by not having to count daily takings manually.