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“Trying to run a business without managing cash flow is like trying to paddle a boat without an oar.” So say the folks at Quickbooks. Here at United Capital Source, we couldn’t agree more. I bet your retail business could use a cash flow makeover. I say that because cash flow problems are pervasive among retail operations of all types. But you can take charge of your cash flow, and I have some ideas for you. One of those may surprise you: small business loans.Most small business owners think good cash flow eliminates the need for small business loans. And, in some ways, that’s true. A healthy cash flow allows you to pay routine bills on time. And handle the occasional surprise, whether it’s negative or positive. Unfortunately, cash flow in retail can fluctuate wildly. That’s why even the healthiest business needs a boost now and then.


Why would your retail business need a cash flow makeover? Sales are up. Your business is growing. Maybe not as fast as you’d like, though, because things keep getting in the way. Finally, you have enough money to buy some new display fixtures. Or add more staff. Then, right on cue, your POS system crashes. In a flash, your upgrade money is gone – used to handle the emergency.

Maybe your restaurant missed out on a big catering job a while back because you couldn’t afford the extra pre-event expenses. It takes working capital to bring in more inventory, supplies, and people. You have to spend now, but you won’t get paid until some date in the future. Every missed opportunity holds your business back. It’s so frustrating!

These are just some indications your retail business needs a cash flow makeover. Better cash management ensures you will have the working capital you need, when you need it. You can be more strategic about growing your retail business. And sleep better at night.


Negative cash flow stifles your business:

  • Goods and services cost more
  • Your reputation suffers – and so does your business credit score
  • You wind up discounting merchandise to boost sales (a technique which does not actually boost revenue)
  • You’re always worried

Positive cash flow builds your business:

  • Pay bills on time
  • Take advantage of cash discounts
  • Accrue money to remodel or expand physical space
  • Take on new brands or product lines
  • Comfortably handle emergencies

Bob Phibbs know his business when it comes to retail. Known as The Retail Doctor, he’s the go-to guy when new (or seasoned) retailers need advice and tips. “Cash flow (maintaining a sufficient amount of available cash) for small retailers is one of the least sexy topics I’m asked about,” Bob admits, “and one of the most daunting tasks facing a small business owner.”

Writing for Independent Retailer, Ritchie Sayner agrees. He says, “Strong, positive cash flow is a must for any thriving retail establishment.” So he poses the question, “What helps to improve cash flow? A. Reduce expenses; B. Increase sales volume; C. Improve inventory turnover; D. Raise maintained markup; E. Properly timed deliveries; Or, F. All of the above.” If your answer was “F,” he says you’re probably a savvy retailer.


Retail finance expert Ted Hurlburt says, “If your retail business’s cash flow is not what you need it to be, chances are your inventory is to blame.” He notes inventory can tie up as much as 70% to 80% of your assets. No wonder you have cash flow problems. He cites several reasons for “inventory creep.”

Sayner agrees with that, too. “Accurate sales and inventory forecasting is essential in order to maintain and strengthen cash flow,” he explains. “Inventory related costs can take over half of a retailer’s annual budget and operating expenses eat up another 40 percent on average. In other words, $0.96 of every dollar is committed to merchandise and expenses when things are running normally. When the items above are the least bit out of sync, cash flow begins to erode.”

Do everything you can to gain control over your inventory. “Those small retailers who make the commitment reap the rewards,” promises Hurlburt. “Sales go up, inventories go down, and the constant, seemingly never-ending cash flow pressures ease. It’s not a one-time fix, but an on-going discipline. In time, cash flow becomes one of your greatest strategic assets, the engine that drives the growth of your business.”

But it takes more than inventory control to boost cash flow. Bob Phibbs suggests:

  • Aligning your sales associates’ goals with your business goals. Otherwise, you’re working at cross-purposes.
  • If you have receivables, make sure customers pay on time. If they don’t, you can’t pay your own bills. For some types of retailers, small business loans called accounts receivable factoring can alleviate this problem.
  • Use your budget to map out your cash needs in advance. You’ll have fewer surprises. Advance planning is especially important for large purchases.
  • Look into Main Street or other local, state, or federal grants that help pay for signage, beautification, etc.

Other great ideas?

  • Reduce expenses wherever you can.
  • Focus on selling higher margin items, not just more items.
  • Work with vendors to improve delivery timing as well as payment terms.
  • Focus on managing your cash, not on making a profit. Without the one, you can’t achieve the other.
  • Invest in business and retail-specific technology. The right applications can help you manage inventory and boost overall financial productivity.
  • Learn which small business loans work best in different circumstances. When you need money, you’ll know you have options. And which one to choose. One of our UCS clients had a “freezer meltdown.” He called us about small business loans, and we matched him with the ideal program right away. No lost inventory, no lost sales.

You can create a cash flow makeover that is a thing of beauty, financially speaking. But you cannot predict or control everything. There will always be times when you need small business loans to continue growing your business.

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