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Where Did All My Profits Go??

Understanding cash flow vs. profit can affect how you manage your business.

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A COMMON COMPLAINT FROM retailers after the CPA has completed the end of year financials is, “Where is the money?” Often, they have reported a healthy profit (which also leads to a bigger tax liability to the IRS), yet their bank account never seems to reflect the profit the business makes.

It’s a common issue. Most store owners expect their profit to show up in the bank account — and that’s perfectly understandable. After all, profit is meant to be what you have left after paying your operating costs and vendors. Yet, rarely does it align.

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The reality is that cash flow and profits are two different things. Cash flow reflects the ins and outs of your bank account over a period of time. Profit is about your income and the expenses that relate to that income. That means the expenses don’t necessarily line up with when you paid them.

One of the best examples of this is the inventory you buy. For instance, let’s say Bob’s business does $1 million in sales for the year. With a keystone markup, Bob makes a gross profit of $500,000 from his business. After expenses of $400,000, his net profit is $100,000.

The bank account tells a very different story. Although the cost of goods sold is $500,000, Bob didn’t necessarily spend that much on inventory for the year. If he spent $600,000 on inventory purchases, he would have increased his inventory holding by $100,000. However, he didn’t sell the extra inventory, and therefore, it doesn’t pay for itself, but it will still come out of his bank account!

Timing is another important factor in paying vendors, too. Whether you pay your vendors immediately or pay the amount six months later, this will affect your bank balance, but it won’t affect your profit — the item is an expense when you sell it, not when you pay your vendor.

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Your bank account can also be affected by assets that you buy. A new vehicle that is deemed a business asset may leave a hole in your bank account now if you pay cash, but as a business asset, its cost will be spread over several years to reflect when it is used. Your profit will look healthier than your bank account in this situation.

Of course, another factor to consider is personal spending. Withdrawing a good deal of money from your business account to support your lifestyle isn’t a business expense and won’t decrease your profit. It will, however, certainly lower the balance of your bank account.

It’s important to understand this difference between cash flow and profit so you don’t get caught spending money you don’t have.

Sherry Smith is the director of business development for The Edge Retail Academy.

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2019 Big Survey: 10 Times When Jewelry Store Employees Left the Job in Dramatic Fashion

Results of the 2019 Big Survey have been rolling in. Here’s a sample.

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WE ASKED SURVEY respondents to share the most epic ways they’d seen someone quit or be fired. Dealing with employees on their way out can be touchy. Sometimes these unfortunate encounters even culminate in award-winning dramatic performances. Read on for the most memorable ways employees have parted ways with jewelry stores:

Top 10 Countdown

The award for best dramatic performance goes to the employees who:

10. Screamed at the top of their lungs, “I QUIT”

9. Showed up in pajamas, had a breakdown, then quit and walked out.

8. Threw rings at the boss while asking for a raise, then quit.

7. Threw a crystal piece through a showcase shelf.

6. Hit the jeweler in the head with a bag of bananas.

5. Threw his key at me.

4. Came in wielding a pipe wrench screaming that we were liars.

3. Ran out of the shop, arms raised in the air, saying “he’s trying to kill me.”

2. Got drunk at a charity event we were sponsoring, hit on one of the ladies and pulled her skirt up. Police were called.

And the No. 1 best dramatic performance goes to:

1. The employee who hired a marching band to quit.

The 2019 Big Survey was conducted in September and October and attracted responses from more than 800 North American jewelers. Look out for all the results in the November issue of INSTORE.

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Wow Your Customers with This Video Messaging App

Jewelers can make online experiences feel a lot more like in-person experiences.

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DO YOU REMEMBER the last time a business did something unexpected for you? Something you truly appreciated? Of course, you do. Those are the moments that imprint themselves on our memories. For me, it was with a video messaging app called Bonjoro.

My Wow Moment

When I signed up for their free trial, I expected to get a video message from them. That’s what they do. And they told me I would. What I didn’t expect was to get a video answer about a tech issue I was having minutes after I emailed them about it. That blew me away.

In the jewelry industry, we pride ourselves on our in-store service and fret about our online marketing. Gone are the glory days with greater foot traffic. Now everyone wants to kick the tires online before they commit to coming in. But what if you could bring your amazing customer service to customers before they ever stepped foot in the store?

Bonjoro to the Rescue

That’s exactly what Bonjoro allows you to do. Bonjoro is an easy to use video to email messaging app for businesses. They make recording and emailing a personalized video to customers almost effortless. And you can even send these videos when they’ll have the biggest impact, like right after they fill out a contact form on your site.

Imagine a prospective customer visits your site. They fill out a contact form with some details about the type of engagement ring they’re looking for. After they press submit, someone on your sales team gets a notification. Once they have a free minute, they pull out their phone and record and send a video in less time than it would take them to respond to the email.

“Hi, Jim! I know exactly the style that you’re looking for, and we have some great options for you. You can see a few of them in the case behind me, but I have a few more that I’d like to pull out and show you. You mentioned that you have a lunch break at noon. Why don’t you stop by tomorrow, and I’ll have them all ready for you? In the meantime, there’s a link to our website’s engagement ring gallery in this window. If you see anything else you like, you can write me a quick message, and I’ll be sure to add it. See you soon!”

An Experience Like No Other

This is an experience most jewelers aren’t going to offer. The enthusiasm and confidence communicated in a video are hard to match in an email response. And the customer has likely never received a response like this from a jewelry store. Just the thought that someone took the time to personally address them with a video will make them more likely to stop in. Plus, they already feel like they know you.

Almost Face-to-Face

Bonjoro is a way to send quick, personalized videos to customers. They’re meant to be mixed into the daily routine and workflow of your sales team. This isn’t the time for high-quality video production or perfect angles. This is much more personal and organic than that.

People online aren’t used to being addressed personally by video. It gives them a personal touch that usually only happens in the store. When you use Bonjoro, the most important thing is to press the record button and talk to the customer like they’re right there in front of you. What a wonderful way to wow your customers!

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Commentary: The Business

Customer Fired for Cause

Her phone manners left something to be desired.

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Laurelle Giesbrecht of French’s Jewellery says her daughter Heidi, now 15, is not afraid to answer the phone despite what happened and calls it “a learning experience.”

WHILE VISITING A great friend and store owner, Laurelle Giesbrecht of French’s Jewellery in Alberta, Canada, we were commiserating over coffee. I have always loved hearing her stories about community involvement or win/win sales interactions. This time, she had a real doozy.

A customer had recently purchased a $300 ring for her daughter and had sent her back to the store for a free sizing. The young girl had decided it was not going to be on her third finger but the much larger first. That meant the ring needed to be sized from 5 to 10. For this, there would be a charge. The girl left the ring.

Laurelle’s daughter, Heidi, was answering phones as her mom finished closing the store. It was the last call before locking up. Heidi asked how she could re-direct the caller and then, holding the phone to her chest, asked her mom if she wanted to take the call. Mom assured her she was doing fine. It brought a smile to her face when she heard her daughter tell the caller that she would pass the message along to their HR manager.

But later at home, the true story emerged. The call had been from the original purchaser of the size 5 ring, and using a long string of vulgarities, she had demanded a full refund. The next day, typically affable Laurelle left a message requesting a return call. When the return call came, Laurelle informed the customer that the swearing she had done over the phone had been directed at her 13-year-old daughter. She added that she would not allow that treatment of any of her staff. After informing the customer that she would process a full refund, she asked for her mailing address so she could mail it. Laurelle calmly informed the customer that she was not to come back to her store.

But the story was not over. The customer ignored the request to not return to the store and instead brought a beautiful bouquet of flowers with a neatly written card. She wanted to personally deliver them to the 13-year-old child who had listened so intently to her vulgar language. This customer knew that the depth of her apology could only be appreciated by a face-to-face meeting between an embarrassed adult and precocious child!

If there are lessons here, they are written between the lines.

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