BY DAVID BROWN | Published in the December 2012 issue
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.
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 inquiries@edgeretailacademy.com or Phone toll free (877) 5698657 Edge Retail Academy, 1983 Oliver Springs Street Henderson NV 89052-8502, USA