A fluid cash flow is the lifeblood of any business. Especially as we see an economic downturn approach, it will be more critical to ensure you are continuously improving your cash flow situation. Here are some actions you can take to generate more cash in your home furnishings retail business.
- Get customers to pay their invoices on time
If you are a store that offers in-store credit, getting your customers to pay their invoices on time is vital. You don’t have cash flow if you don’t get paid. Cash flow requires constant managing and monitoring of your accounts receivable. Having ideal payment processes that are easy for your customer – not your staff, will get you paid faster and on time. Offer a variety of methods, for example:
- Accept various payment options (cash, credit, debit, Apple pay, Venmo, Paypal, gift cards)
- Send your monthly bill by text message with a link for payment
- Set up early payment incentives (15% coupon for more products when they pay off early)
- Simple interface on your website for payment vs. coming into the store
- Liquidate excess inventory
Many retail businesses have their cash tied up in inventory. Many retailers have excess inventory, and stores have trouble selling their products. Therefore, it’s essential to sell your excess inventory before it ages and costs too much to keep in stock. Here are some steps you can take to liquidate excess inventory quickly.
- Sell them on online marketplaces
- Offer sale discounts
- Run a clearance sale
- Run Seasonal promotions
- Run a Flash Sale
- Sell them to inventory liquidators
- Review your insurance policies
Retailers should review their insurance policies every six to twelve months. Insurance changes every year. Spend the time to review your current coverage, get competitor estimates at least every year from a broker representing many different providers, and make sure you choose a company that understands your industry, business, and the marketplace. Select providers that take advantage of group buying power to get you the best rates and ensure you are properly covered.
- Review your credit card terms and conditions
You may also want to look at your credit card processing rates and fees, like reviewing your insurance policy. One of the easiest ways to keep some cash in your pocket is to check what you are paying for credit card processing and review your terms and rates. Usually, fees are associated with every credit card transaction and can add up quickly.
While these fees are generally minimal, even a few cents reduction saves you money. HFA’s Bankcard Processing program can do a statement analysis to show you where you can save on your bankcard processing.
- Invest in the right POS technology
Modern technology and software can elevate your business, improve operations, and secure more consistent cash flow. Having an effective inventory management system is a big part of this.
Investing in an inventory management software that accurately records your stock levels, provides you with inventory management notifications, identifies problems, and prioritizes items with negative stock or sold less frequently.
But a Point of Sale system does much more than that: product reporting helps you identify at your business what’s working and what isn’t; team member management assists with scheduling to optimize hours and reduce overtime pay or overstaffed floors; accounting integrations allow you to audit your business and seamlessly complete payroll and taxes.
- Audit of common area maintenance (CAM) costs
Retail Store Maintenance charges, including operating costs incurred by the owner such as exterior cleaning, parking lot maintenance, and the like, are fixed costs. These fees may include lighting, bathrooms, elevators, landscaping, and parking. When a business rents or leases its retail space, these charges are paid to a landlord. If you rent or lease, you must know what Common Area Maintenance charges you are paying and include them in your operating costs. If your lease agreement allows you to perform Common Area Maintenance audits, you should do it.
A Common Area Maintenance audit can help you identify excessive fees by analyzing your commercial lease and invoices. Certainly, these audits can be time-consuming and painful, but if you find errors and overcharges, you may be able to recover some cash and avoid future charges to help your cash flow. For example, an overcharge of $1.00 per square foot on an 800-square foot store could result in an additional $9,600 per year.
- Always have a cash reserve
It’s always better to be conservative regarding cash flow. Having a cash reserve is about saving money at the end of each month. This reserve will cover your expenses in case of an urgent need for cash. The cash reserve allows you to manage the slow or difficult months better, replace equipment, buy new technology if needed, or even pay your employees.
Maintaining a cash reserve for your business is critical for weathering even minor bumps in the road.
Bottom Line, downturn or not, you should always look for ways to manage expenses or create cash for your business. Hopefully, the tips above gave a few ideas on where to look and how to have more cash flow through your company.
The Home Furnishings Association is always here to help you save money and evaluate the services you use daily. Contact an HFA Membership Representative to ensure you maximize the HFA Member Benefits for In-store financing, Bankcard processing, Business and Health Insurance, Marketing Services, and more.