Retailers: Here's How to Manage Your December Cash Flow

Piggy Bank and Christmas lights December cash flow

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When it comes to cash flow at the end of a year for most retailers, it is very easy to be overwhelmed. During a pandemic with supply chain disruptions, the threat of shutdowns, and limited occupancy it's easy to miss the basics of December financial management.

December has different issues than November's cash flow; it's the time of year that your cash flow peaks but there are a number of other season-specific problems which stores face...

Seven December things that affect your end-of-year cash flow:

  • Double payroll
  • Double shipments
  • Extended demands for curbside and online fulfillment.
  • Use up more supplies
  • New employee retail sales training
  • The bulk of your year in sales
  • Theft (internal and external)

The holiday season provides a much-needed influx of cash to your business and cash flow worries seem to disappear. Nevertheless, the end of the year or first week of January is the prudent time for the savvy retailer to prepare for some upcoming bills.

Don’t forget these items while you are hopefully counting your profits...

The Landlord

Most retailers have triple-net leases on their location. As such, they are responsible for their share of any increased property taxes, maintenance costs for common areas, and building insurance. It is a rare year when these cots do not increase. Most landlords, also looking to ease their own cash flow issues, will mail these assessments and bills at this time of year.

The Employees

Many companies, in the interest of easing their money problems at the end of the year, have year-end cash bonuses payable in the first quarter. Now is the best time to set aside the funds for these payments.

The I.R.S.

Though most retailers have been making quarterly estimated payments, it is now time to completely pay your tax bill. Penalties are significant and should be avoided at all costs. In addition, filing an extension can also become burdensome as the interest rate is also exorbitant. The I.R.S. will get its money one way or the other; best to pay them on time.

The Owner(s)

In a similar vein, any S-corporation owners should use current cash flow to fund their retirement plans to minimize their tax exposure. Also, distributions to active or silent partners should be made soon as soon as possible as all parties are responsible for paying their fair share of taxes in a timely manner.

The Business, Itself

It is certainly tempting to “take the money and run” as they say but January is a fresh start for every business. As such, it is the right time to take a critical look at the infrastructure of your location.

Are there looming maintenance and cosmetic issues that should be addressed? Fresh paint and patches are small items but is it time for a new roof? New fixtures? New technology?

Resolving these problems now, when money is not tight, will invariably save money over the long term. In addition to refreshing the look of your store, it will also avoid potential accidents and help eliminate workers comp or insurance claims that could further impede future cash flow.

Be proactive in your next year's thinking; get out ahead of things so that you aren’t beginning the year in a mess and disarray behind the 8-ball.

What to do to be proactive for the new year:

  • Plot out fixed expenses; set aside payments
  • Pay all vendors upfront when possible
  • Keep after fluctuating costs like utilities
  • Offer bonuses in the form of products, not cash
  • Don’t keep your holiday staff on any longer than necessary
  • Plan next year’s holiday purchases by seeing what did not sell this year and cutting back on orders for next year.

retail book

See also, How To Improve Your Retail Sales During December

In Sum

While it's never fun paying bills, there is no alternative.

In addition, every item mentioned above has had a beneficial effect on your business and contributed to your success.

In short, it is your responsibility to use your profits wisely and to meet your obligations.