The seeds of tomorrow’s crisis are being sown today. use this checklist so you aren’t caught off guard.
{loadposition laurieowenheader}
[h3]Watch Out for Signals of a Cash Crunch[/h3]
[dropcap cap=S]tore owners often get trapped because they don’t heed the messages their business sends, and they don’t pay attention to basic principles. This checklist represents danger signals that have a clear and negative effect on cash flow. Take a few minutes under the harsh, cold light of reality to ask yourself how many of the following danger signals exist in your business and then evaluate their implications:[/dropcap]
[h4][b]Inventory Management[/b][/h4]
• No physical inventory taken on a regular basis.
• Lots of old inventory and no plan to get rid of it.
• Buying at trade shows without a purchasing plan.
• Buying for brand names versus targeted gross margin and turn.
• No knowledge of what actual price points sell in your store.
• Lack of a good point-of-sale system that shows your gross margin, turns and return on inventory by department.
[h4][b]Purchasing[/b][/h4]
• Supplier discounts rarely taken.
• Offering credit to boost sales.
• Buying from vendors because you can’t say no.
Advertisement
[h4][b]Banking Relationship[/b][/h4]
• No on-going communication between you and your banker.
• Credit line not completely paid off each year for at least 30 days.
• Short-term credit like credit lines used for long-term assets such as store expansions or leasehold improvements.
[h4][b]Accounting Practices[/b][/h4]
• You brag to others about how much money you save by doing your own books.
• Bank statements not reconciled every month.
• The same person who does your books also deposits your checks, pays your bills, opens your mail, never goes on vacation, etc.
• Balance sheet is prepared only at the end of the year, and then used only for tax purposes.
• You don’t get accurate monthly statements (income statement and balance sheet) by the 15th of the following month.
• You spend more time avoiding taxes than you do actually figuring out how your business is doing.
Danger signals are just that — signals. The longer you wait, the fewer options you will have. Now is the time to gain control and keep it. Get ahead of the game and be in a much better position to weather whatever rough seas lie ahead.
Laurie Owen is senior vice president at Business Resource Services. Contact her at [email protected].
Advertisement
[span class=note]This story is from the October 2008 edition of INSTORE[/span]