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David Brown: Beware the Cash-Flow Danger Zone




David Brown: Beware the Cash-Flow Danger Zone
David Brown: Beware the Cash-Flow Danger Zone DAVID BROWN on FINANCES

DAVID BROWN is president of the Edge Retail Academyan organization devoted to the ongoing measurement and growth of jewelry store performance and profitability. For further information about the Academy’s management mentoring and industry benchmarking reports, contact or phone toll free (877) 569-8657.

The first month’s rent arrived and, awash with cash, he enjoyed his newfound wealth by treating himself to a few toys and some good nights out on the town. Not long after, the first of the building expenses arrived along with the interest bill from the bank, and he found himself short of cash to make the payments.M
any years ago a friend bought his first investment property. He made an excellent purchase, and the property was totally self funding — rent was more than enough to cover the costs. All he had to do was sit back and enjoy the property paying for itself.

Within a few months, the property that should have been self-funding ran out of funds, and he was forced to sell it as he could no longer meet his obligations.

But if you are an excellent jeweler who needs some help with the requirements of business then all is not lost. Skills can be learned — or at the very least, delegated to those who are better equipped to handle them. The most important thing is to know your limitations and seek help in the areas that require it.

What he failed to understand was that sometimes the cash may come in before it has to go out — and the bigger the amount that flows in the bigger the hole you can dig for yourself.

This is particularly relevant for jewelers as the holiday season approaches. Most stores achieve 20 percent or more of their sales in December, a significant portion of the year’s revenue. Many businesses find themselves awash with significant cash, often the only time this happens all year. What can sometimes be forgotten is the tsunami of expenses, particularly inventory that has to be paid for during January and February.


It’s important to have a good handle on your margins and outgoings at this time of year and commit to not making any hasty financial decisions of any significance during this time. December is not the moment to decide if you can afford that new car or not!

Be conscious of the cost of what you sell. If you operate on keystone, then be aware that for every dollar of sales you make in December there will be 50 cents of inventory obligations to meet once January rolls around. This will obviously depend on whether your sales arrive in cash, and whether the items you sell are new or old, but it is a good rule of thumb to keep in mind.

Don’t spend what you don’t need to. Keep your cash reserves on deposit and let the dust settle. Give yourself a chance to work out your expenses once the holiday season ends. There will always be some costs you hadn’t counted on.

Take temptation away. If you are able to move funds into an account that can’t be accessed, then do so. Leaving it in your daily transaction account leads only to it being spent. You can always access it again if required; money left sitting around has a habit of being required!



When the Kids Have Their Own Careers, Wilkerson Can Help You to Retire

Alex and Gladys Rysman are the third generation to run Romm Jewelers in Brockton, Mass. And after many decades of service to the industry and their community, it was time to close the store and take advantage of some downtime. With three grown children who each had their own careers outside of the industry, they decided to call Wilkerson. Then, the Rysmans did what every jeweler should do: They called other retailers and asked about their own Wilkerson experience. “They all told us what a great experience it was and that’s what made us go with Wilkerson.” says Gladys Rysman. The results? Alex Rysman says he was impressed. “We exceeded whatever I expected to do by a large margin.”

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