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Laurie Owen: Watch Out for Signals of a Cash Crunch

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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.

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[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].

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[span class=note]This story is from the October 2008 edition of INSTORE[/span]

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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.

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Laurie Owen: Watch Out for Signals of a Cash Crunch

mm

Published

on

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.

Advertisement

[h4][b]Purchasing[/b][/h4]
• Supplier discounts rarely taken.
• Offering credit to boost sales.  
• Buying from vendors because you can’t say no.

[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.

 


 

Advertisement

Laurie Owen is senior vice president at Business Resource Services. Contact her at [email protected].

[span class=note]This story is from the October 2008 edition of INSTORE[/span]

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.

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Most Popular