Retailers need to make cash flow a priority or else feel the negative effects of a cash crunch. This means digging deeper into sales and operations to reduce expenses and increase profitability. But, because cash flow affects everything, you can get overwhelmed quickly by the amount of work that’s necessary.
Experts believe the best way to approach this is to look at your business in segments. Our 7 strategies below are organized by business segments to break this seemingly monumental goal into manageable tasks.
Start with Your Suppliers
1. Accounts payable. Try to schedule all payments on the exact date they are due. Electronic payment systems have made this easier, plus you can schedule them in advance. Your vendors require a gentle touch, so try your best not to miss due dates, which may incur late penalties and higher rates. Or, an alternative is to negotiate discounts for early payment. Either way, you’ll have more cash on-hand to cover more pressing needs.
2. Establish a line of credit. Quick, short-term loans require a lot of paperwork and sometimes need collateral. A line of credit will give you more flexibility and lower fees. Your suppliers may offer a line of credit, but make sure their terms are more attractive than your bank’s. This can also build a long-term relationship with your favorite suppliers.
Give Your Customers a Better Experience
3. Adjust prices and bundle products with services. There are many strategies to help you navigate pricing and its rocky waters. If your prices are too high, you may lose long-time customers. Too low and you will bleed cash. The idea is to be profitable and attract new customers. You can also bundle products and services at a discount to promote bigger purchases.
4. Upsell. Train your employees on how to upsell. They will provide a higher level of service and engage more with the customers. Plus, your customers will notice and tell their friends about their positive experience.
Operations
5. Subscriptions and leasing versus buying. Purchases can tie up cash. Leasing can relieve the pressure buying can put on your money. Lease payments are often lower than loan payments, and tax deductible as a business expense.
6. Bimonthly payroll. A biweekly payroll cycle has 26 cycles, whereas bimonthly is only 24. Each cycle has administrative fees and other costs associated with it. Fewer cycles means less time and money spent processing payroll. Combine this with direct deposit and you’ll be writing fewer checks.
7. Reduce overtime. There is no doubt that employees working overtime deserve fair compensation for their efforts. If you’re paying time-and-a-half for overtime, you’re adding 50% to your expenses and can add up quickly. Typically, overtime is a scheduling problem, so look into ways your employees can work with flexible schedules. You’ll have more people working when they’re needed and fewer when they’re not.
Quick Solutions for Long-Term Sustainability
Any combination of these strategies can free up cash and strengthen your relationships with suppliers and customers. Some of these feel like short-term solutions, yet they act as long-term investments in your business. The money each one can save upfront will make your business more flexible to changes in the market and resilient against economic downturns.