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David Brown: Manage Your Cash Flow

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BY DAVID BROWN | Published in the December 2012 issue

David Brown: Manage Your Cash Flow

There can be a big difference between the profit that a jewelry store owner can make and the amount of money he has in the bank. Never is this more obvious than when it comes time to make a payment to the IRS on profit you have supposedly made, only to find the cash isn’t there!

Retail stores have the advantage of being a cash business — that is, they normally see the cash come in before the money has to go out to vendors. That said, it can still be a headache trying to balance the accounts, and there are a number of things you can do to help turn the situation around:

1Chase up your layaways. Do you have a procedure in place to follow up each month? Make someone responsible for this area of the business and the effect on your cash flow will be noticeable.

2Follow up on repairs. Stay in regular contact with customers who have not been in to collect repairs. This is dead money — you have already outlaid the cost of getting the item fixed so the balance owing is all for the bottom line.

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3Get deposits, and make sure they are a healthy percentage. We recently advised a client to increase their deposit from 20 percent to 50 percent. The effect has added $20,000 to their bank account.

4Hold orders back. If you are down to the last couple of days of the month, then holding orders may be wise. Waiting a day or two could offer the benefit of deferring a few thousand dollars for a month.

5Request deferred payment. You need to get your reorders back straight away — but you may be able to negotiate two or three months for settlement on the account.

6Look to exchange product. All stores need to refresh their inventory. But if you can exchange tired inventory for fresh product, this will have a positive effect on cash flow as you won’t need to reinvest cash in getting the new product.

Managing cash needs to be a key part of your overall strategy. Don’t neglect this important part of the business and make sure you explore all options for keeping your bank balance in check.

About the Author: David Brown is President of the Edge Retail Academy, an 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 email to [email protected] or Phone toll free (877) 5698657 Edge Retail Academy, 1983 Oliver Springs Street Henderson NV 89052-8502, USA

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Wilkerson Testimonials

If It’s Time to Consolidate, It’s Time to Call Wilkerson

When Tom Moses decided to close one of the two Moses Jewelers stores in western Pennsylvania, it was time to call in the experts. After reviewing two candidates, Moses, a co-owner of the 72 year-old business, decided to go with Wilkerson. The sale went better than expected. Concerned about running it during the pandemic, Moses says it might have helped the sale. “People wanted to get out, so there was pent-up demand,” he says. “Folks were not traveling so there was disposable income, and we don’t recall a single client commenting to us, feeling uncomfortable. It was busy in here!” And perhaps most importantly, Wilkerson was easy to deal with, he says, and Susan, their personal Wilkerson consultant, was knowledgeable, organized and “really good.” Now, the company can focus on their remaining location — without the hassle of carrying over merchandise that either wouldn’t fit or hadn’t sold. “The decision to hire Wilkerson was a good one,” says Moses.

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David Brown

David Brown: Manage Your Cash Flow

Published

on

BY DAVID BROWN | Published in the December 2012 issue

David Brown: Manage Your Cash Flow

There can be a big difference between the profit that a jewelry store owner can make and the amount of money he has in the bank. Never is this more obvious than when it comes time to make a payment to the IRS on profit you have supposedly made, only to find the cash isn’t there!

Retail stores have the advantage of being a cash business — that is, they normally see the cash come in before the money has to go out to vendors. That said, it can still be a headache trying to balance the accounts, and there are a number of things you can do to help turn the situation around:

1Chase up your layaways. Do you have a procedure in place to follow up each month? Make someone responsible for this area of the business and the effect on your cash flow will be noticeable.

Advertisement

2Follow up on repairs. Stay in regular contact with customers who have not been in to collect repairs. This is dead money — you have already outlaid the cost of getting the item fixed so the balance owing is all for the bottom line.

3Get deposits, and make sure they are a healthy percentage. We recently advised a client to increase their deposit from 20 percent to 50 percent. The effect has added $20,000 to their bank account.

4Hold orders back. If you are down to the last couple of days of the month, then holding orders may be wise. Waiting a day or two could offer the benefit of deferring a few thousand dollars for a month.

5Request deferred payment. You need to get your reorders back straight away — but you may be able to negotiate two or three months for settlement on the account.

6Look to exchange product. All stores need to refresh their inventory. But if you can exchange tired inventory for fresh product, this will have a positive effect on cash flow as you won’t need to reinvest cash in getting the new product.

Managing cash needs to be a key part of your overall strategy. Don’t neglect this important part of the business and make sure you explore all options for keeping your bank balance in check.

Advertisement

About the Author: David Brown is President of the Edge Retail Academy, an 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 email to [email protected] or Phone toll free (877) 5698657 Edge Retail Academy, 1983 Oliver Springs Street Henderson NV 89052-8502, USA

Advertisement

SPONSORED VIDEO

Wilkerson Testimonials

If It’s Time to Consolidate, It’s Time to Call Wilkerson

When Tom Moses decided to close one of the two Moses Jewelers stores in western Pennsylvania, it was time to call in the experts. After reviewing two candidates, Moses, a co-owner of the 72 year-old business, decided to go with Wilkerson. The sale went better than expected. Concerned about running it during the pandemic, Moses says it might have helped the sale. “People wanted to get out, so there was pent-up demand,” he says. “Folks were not traveling so there was disposable income, and we don’t recall a single client commenting to us, feeling uncomfortable. It was busy in here!” And perhaps most importantly, Wilkerson was easy to deal with, he says, and Susan, their personal Wilkerson consultant, was knowledgeable, organized and “really good.” Now, the company can focus on their remaining location — without the hassle of carrying over merchandise that either wouldn’t fit or hadn’t sold. “The decision to hire Wilkerson was a good one,” says Moses.

Promoted Headlines

Most Popular