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How to Put Your Business on Sound Financial Footing
by Patricia M. Johnson, CMC and Richard F. Outcalt, CMC
Cash is the lifeblood of every retail business.
Without cash for inventory, payroll and other expenses, an emergency is imminent. Even a profitable business can experience not having enough cash at the wrong moment. One moment cash is flowing, the next moment it is only dripping. Drip. Drip.
It’s an emergency when the cash flow stops and paralyzes your store. But if you still believe in the long-term viability of your business and are willing to work toward its success, put these six steps into action immediately. They are the foundation for avoiding future cash crunches.
Take Charge! What to Do in a Survival Setting
Step #1: Personally monitor all cash disbursements
In a survival situation, cash management should not be delegated. Take personal responsibility for all decisions affecting cash disbursements. Stay informed on a minute-to-minute basis. Dispense cash sparingly.
Step #2: Face the situation squarely.
The fact that you’re reading this article and are prepared to take charge shows that you are willing to level with yourself about your concern for your store’s situation. Now take it a step further—look at the cold, hard facts.
List all your liabilities.
List all of your sources of cash.
Look for any areas that might produce immediate cash: sales, receivables, financing? Will these sources of cash eventually allow you to meet your debts and continue to operate your business?
After a careful and honest scrutiny of the facts, if you believe your store can survive, you are ready for the next step.
Step #3: Get on the phone to all creditors
Don’t hide. Call your biggest creditors. Talk with them. Remember, they want you to be in business. Look at some of your bigger cash outlays.
Landlords: You may be able to delay payment by a week or two, whatever it takes to get through the crunch.
Vendors: Find out how flexible they are. Call them before they call you.
Lenders: Explain the situation to your banker, and find out what options exist.
Step #4: List all saleable assets
Now is the time to liquidate superfluous inventory, fixtures, etc.
Look at everything—even that old display shelf in the back room; another retailer down the street might be able to use it. Use eBay or Craig's List; turn it into cash!
In storage you may have some old merchandise gathering dust.
Brush it off and put it on sale. Get the word out about your sale and be sure to put the old products along side an appealing display of fresh inventory.
Customers drawn to the store for the sale may choose to buy the new merchandise.
If they see an attractive display of new arrivals, people won’t misinterpret your sale as a “going out of business” sale.
Step #5: Prepare a cash flow budget
This is your most important tool. Combined with the steps above, the cash flow budget will help steer you out of trouble.
We suggest that this first budget cover the next six weeks. This will help identify any shortfalls and possible sources of cash to cover them. This six-week plan is an interim measure that will meet your immediate needs.
A longer cash flow budget should be shown to the bank along with your pro forma (projected) income statement and pro forma balance sheet.
Step #6: Cut and slash
This is the hardest step and requires that you remain both objective and honest at the same time.
The ROI's Members-Only Collection includes even more for owners about forecasting and managing cash flow.
Online Calculators for Retail Projections - See in advance retail profits and cash flow - Integrated!
Explanatory How-To Articles - Used and loved by retailers worldwide!
Webinars from The Co-Founders - Lively and empowering!
Online, Self-Paced eLearning Courses - Learn it once. Use it forever!
Short How-To Videos - See it in action!
Self Evaluation Tools - Get Quick Insights
And much more!
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