Retailers! January is the time to get your financial house in order to have the most profitable retail sales and stress-free year possible!
Here are five cash flow tips for January:
Plan, Plan, Plan for the Rest of the Year. It sounds like a broken record – it is – this simple piece of advice is the soundest one you will ever get and bears repeating. Just like your marketing and merchandising, no matter how well prepared you may feel about the coming year, now is the time to make your plans and to develop contingencies for any problems or emergencies that may arise. Weather issues, slow shipping, vendors going out of business can all ruin your plans, just have options so you aren't paying more to ship because you ran out of best-sellers.
Decrease Labor Costs. With Covid-19 many retailers found they were paying overtime to make up for short staff. Now is an excellent time for smaller retailers to see if you can convert some of the better temps to regular employees and get rid of some of the dead wood in your store - all of which will improve your future cash flow. Review every employee's performance following my guidelines.
Prepare for Tax Season. While it is important to have your paperwork ready for the past year, no better time than now to be preparing for the next. Having the proper documentation for your accountant and the monies available to pay your tax will reduce your tax burden and your accounting fees. If you've had a good year, profit-wise, the savings may seem inconsequential but it all adds up. And by all means, if you missed quarterly payments last year, pay them now and avoid further tax penalties.
Add Infrastructure. Any building improvements or large capital expenses like new POS systems, mobile payment integration or new fixtures should be incurred as early as possible in the new year so that you will gain the maximum amount of depreciation expense for the year. Truth be told, you should already have been thinking about this issue before the end of last year. Still, if you had a stellar holiday season, sales-wise, you should be looking to expand your business and now is the time. Make a wish list, price it out, schedule it when you have the cash or get the options to lease and get going during the doldrums of winter. Yes we're coming out of a pandemic but prepare for the coming consumer demand in summer.
Invest in Bargains. Your distributors and manufacturers are struck by the same concerns as retailers when it comes to leftover merchandise after such a wacky 2020. Even better, they probably have a lot more of it than the average store owner. Depending on your business, a few prudent investments in sale items can reap rewards and improve your cash flow on an almost immediate basis. Just one caveat - only get what you already are selling - don't experiment with closeouts. And no holiday merchandise!
Each of these tips can yield significant and timely cash flow benefits for your retail business but only if you implement them in a careful, well thought out manner. Where cash outlays are required, don't just throw money at the situation like adding a new product line in hopes of growing business - that has its limits.
Instead, calculate where your best return lies and deploy your money there. In some areas, cuts need to be made - employees, lines that don't sell, non-responsive vendors - so act quickly and appropriately.