For many small business owners, good cash management is a delicate dance between ensuring you have the money to operate and keeping enough of it to fuel growth. For retailers, this balancing act can be even trickier. So here are tips for managing your money in a retail business:
Cash flow management is the process of collecting and managing money related to your retail business.
It’s essential for two main reasons:
- Cash flow is the backbone of a business, so if your cash flow is terrible, it can cause significant issues with how you run your store.
- Cash flow management is something that can be learned, practiced, and improved over time. If you know how to manage your cash flow properly and keep up with collections or payments on time (or within the terms of any contracts), this will help keep stress down in the long term.
You need to manage cash properly so you can cover all your expenses, pay off loans if needed, and still have a profit.
The first thing you need to understand about managing cash in a retail store is that it is not just the money that comes in from sales but also the money you spend on your business operations. Therefore, cash flow is a process of collecting and managing money related to your retail business.
- You need to manage cash properly to cover all your expenses, pay off loans if needed, and still have profit left over at the end of each month. If you don’t take care of these things properly, then managing your cash flow could become an overwhelming task for you. This will make it difficult for you to manage your finances effectively because there will be too much pressure weighing down on both sides of the coin (or bill).
Here are a few tips you can use to manage your cash in a retail store:
- You need to know how much money you have and how much you need.
What’s the difference between these two statements? Well, if your store will succeed, then it needs to make a profit. And for your store to make a profit, it has to make more money than it spends on operating costs (e.g., rent) and paying off loans (e.g., credit cards). So if we break this down into two parts:
- What are my daily operating costs?
- How much money do I have right now?
- Watch over your product turnover rate.
You can maximize your profit by focusing on product turnover. Product turnover is the amount of time it takes to sell a product and replace it with another product. As retail stores are primarily concerned about selling as much inventory as possible, we need to ensure that our products get quickly sold so we can restock them and make more money!
Keep in mind that there are two types of items: quick-moving items (such as food, drinks, and emergency supplies), which have a higher turnover rate, and slow-moving ones (such as clothes).
- Keep track of your daily operations costs.
Keeping track of your daily operations costs is necessary for running a successful retail business. These costs include employee wages and benefits, rent expenses, utilities, and any other bills required to keep the doors open. While these may seem like apparent expenses for any business owner, it’s essential to keep an eye on them so you know where your hard-earned cash is going.
- Set aside a profit margin for unexpected expenses.
Your business operates on a budget, which is the amount of cash you need to cover all your operating expenses, including payroll and rent. The difference between the budgeted/alloted amount and actual expenses is called profit (or loss).
When unexpected costs arise—and they always do—you need to be prepared with extra cash in your account.
In managing retail stores, proper cash flow management is essential to make sure that your business will thrive and when it comes to cash flow managing, you need to be a little creative and resourceful for the sake of building a strong foundation for your retail business. Whether it’s managing your employees, managing your cash flow, managing inventory, or managing your customers, the core principles remain the same. Adapting to change and constantly trying to improve will help you manage your retail store well.
Need Extra Funding?
Managing your cash for your retail store as a small, new business or even as an old one is sometimes challenging, but you shouldn’t let financing hold you back. With Alternative Funding Group, we can ensure that funding doesn’t get in the way of your business’s growth. We have financing options for every type of business. There are huge benefits of getting a loan from us. If you have bad credit or no credit, we can help! Through our lending process, Alternative Funding Group can help you get the finances to grow your business.
Our team has helped thousands of business owners fund their business dreams, and we can help you too! So there’s no reason to wait another day. Apply today, and get your cash in no time!