Inventrak Blog

The retail cloud and Small and Mid sized business

Tag >> Cash Flow
Jul 21
2009

Take Care of Your Cash Flow and Navigate Your Business to Thrive

Posted by Donna Tang in retail cloud, Cash Flow
Donna Tang

In such a volatile economic environment, small retailers are struggling with cash: you are facing tight bank lending; your customers seem to come back, but they do not spend that much.  The good thing is that you have already navigated your business through the worst time. Now, you need to be cautious and ensure that your business generates positive cash flow, so that you can grow your business during the upcoming recovery.

Here are some tips:


Reward programs and gift cards: If you want your inventory to move faster and generate more cash, reward programs and gift cards are better methods than by using discounts. Simple discounting is like giving your customers cash back, but they probably will not use their extra cash at your store. However, reward programs and gift cards ensure that your customers use those cash savings at your store for your products

Keep optimum inventory levels:  Inventory generates your cash, but it consumes your cash, too. The principle to keep an optimum inventory level is to invest minimum cash in inventory to meet market demand.  We have talked a lot about it, reaching this goal requires quick response strategy: order as little as possible at the beginning, read your daily sales reports and ultimately make reorder decisions based on those short term demand trends. 

Concentrate on core lines:  Every retailer has some product lines which generate more sales than others. Why not focus on those popular lines? You may have various reasons for maintaining the slow moving products, but why not use the funds you have been using to buy the least popular items to expand your hot lines? Or develop a related line of hot lines? (Note:  Whenever you want to test market demand, you can start with a small quantity, see the trend on the daily sales report and then confidently invest more on the hot items.)

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Apr 14
2009

Small retailers in recession-where is my cash gone?

Posted by Donna Tang in Inventory, Cash Flow
Donna Tang

Without doubt, cash flow is a serious issue that small retailers are struggling with. Where is all your cash gone?

The answer can be found at your balance sheet.

 You can see most of your cash has been invested in your inventory. Inventory is your biggest assets which generate almost all your cash, but it also consume large part of your cash. New items, new categories, reorders, there is always something to buy. So if your cash is tight and you wonder where it is gone, look at your inventory.

Thus inventory control is very important from the perspective of cash flow management.

Small retailers need to watch out every dollar invested in the inventory.

Inventory control strategy

Order the minimum necessary to meet existing demand.  

The smart strategy under these circumstances is to order the minimum necessary to meet existing demand. This is a difficult balancing act as no retailer wants to take the chance of being out of hot items and sending customers to another retailer in a competitive market. The point I tried to make here is that small retailers should have ample supply of items that sell daily or frequently, typically the items that get people into the store.  

Offer less high end items

Another strategy in recession is to keep broad and deep selections by offering less high end items and more inexpensive to moderately priced items for budget conscious customers. Additional consideration is in this appearance of the store, as minimal selections can convey a negative impression to customers. Often a well stocked store implies a certain success to customers and encourages a better relationship.

Cash outflow schedule

Another point I want to make about your cash flow management is cash outflow schedule. You should really pay attention to your cash outflow schedule. At any time, you should be assured that you have enough money to pay your vendors and expenses such as wages. If you don't, for example, you have $20,000 payment for your new orders which is due today, but you do not have the money to pay, what will happen? Nothing good will happen.

Thus

  • You should always be sure that you have enough money to pay your vendors before the date due.
  • For fixed expenses such as rent, wages and utilities, you need make reserves in advance. In such a bad economy environment, if you do not want your store operations in trouble, you should reserve at least one month' expenses.

 

The good news is that consumer  confidence jumped in April, you need to watch our your cash flow to sustain and wait for the good time coming.  
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