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David Brown: Why You Must See the New Year In Right

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Quickly getting on top of cash flow can make the difference between a great and stressful new year.

This article originally appeared in the January 2016 edition of INSTORE.


business advice for jewelers from David Brown

If you prepared a list of the most challenging tasks you face as a business owner, I have no doubt that balancing cash flow would rank in the top two or three. It can be particularly challenging given retail generally receives its cash immediately for goods that then have to be paid for later. The highs and lows of holiday-season trading only add to the difficulties of managing this situation.

 

Depending on the arrangements you have with vendors, this could be exacerbated by deferred payment terms that can see unexpected debts fall due when you least expect them.

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If you’re starting into a new year then now is the perfect time to begin budgeting both for profit and for cash flow to help manage this situation better. There are a few steps you can take to help you through this more difficult period:

 

Cash up that old inventory. Whether you go for a full post-holiday sale or use other means to move it on, clearing the deadwood is a good option to help you start balancing the bank account. Be sure that if you go into sale mode you don’t do it half hearted, and that you remove all your good sellers, or they will be the first to go and nothing will be achieved.

 

Turn loose stones into product. Most stores don’t manage their loose stones all that efficiently. Using these to remake fast sellers and restock can be an effective means of keeping the cost of restocking down.

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Discuss terms with your vendors. You need to be careful here that you don’t rob Peter to pay Paul. Discussing an extended payment period for reorders and new items can help ease the blow of getting your inventory range back on track. Again, this needs to be a win-win for both parties and you should make a commitment to the vendors that you will be willing to reorder fast-selling items.

 

Delay delivery. When reordering fast-selling items after the 20th of the month it can be a good way of deferring payment just by requesting delivery to come at the start of the next month. Provided the item isn’t so quick that you would sell it weekly then a few days won’t matter if it gets you an extra month’s credit. This can be effective on bigger-ticket items that may be slower to sell.

 

Review old items with your vendors. Again, this needs to be a win-win for both parties. Exchanging product with vendors can help free up bottlenecks and get fast sellers moving quicker for both parties provided you are willing to reorder.

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Thinking ahead about your new-year intentions can help manage this tricky time of year better and ensure you get off to a good start in 2016.


David Brown is president of the Edge Retail Academy. To learn how to complete a break-even analysis, contact [email protected] or (877) 569-8657.

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