BY WILLIAM J. LYNOTT
Cash flow—how much money is flowing into and out of your store—is an easy concept to understand. Still, not every owner is aware of the impact that skillful cash management has on net income, probably because the importance of managing revenue is far easier to recognize in some types of businesses than it is in others.
Take home construction, for example. When a builder takes on hundreds of thousands of dollars in short-term debt in order to construct new homes, it’s obvious that
he or she must generate substantial, dependable, positive cash flow in a hurry if the
business is to survive.
Of course, the situation is not that dramatic for most pet retailers, but skillful cash
management is critically important in every form of business activity, regardless of size.
Losing control of money has generated more financial headaches for business owners
than temporary red figures on the bottom line. Conversely, a sensible cash management
system can provide a comfortable and profitable cushion during good times and bad.
Here are eight powerful techniques that may help you smooth out your cash flow
and improve your net income right now:
1. Keep every income dollar working for you.
Just as large companies do, it’s important for you to put every revenue dollar to work as soon as you receive it.
If you don’t already have one, open a money market account
at your bank and ask to have it linked to your business checking
account. That will allow you to make telephone or online transfers
between the two accounts.
Then, deposit all of your daily receipts into the money market
account, where they will immediately start drawing interest.
Never deposit receipts directly into your checking account. Keep a
minimum balance in the checking account and transfer cash by phone
or online only as needed to cover checks to be written.
The banks have made this cash management technique so easy
to use that there is no reasonable excuse for not using it. While interest rates are anemic now, they are likely to start climbing soon, and
you’ll be ready to benefit when they do.
2. Don’t be in a hurry to pay your bills.
There’s good reason why checks are slow to come in from most people who owe you money. It’s because hanging on to cash as long as
possible keeps that money available to work for the business.
That’s why it’s important for you to set up a system that allows you
to pay your bills just before they come due. That’s an easy thing to do,
and it moves you up another rung on the ladder of professional cash
Of course, you don’t want to jeopardize your credit standing by
paying bills late. Pay your bills just before they are due—not before,
not after. It is especially important to avoid late payment on credit
card bills because of the oppressive penalties that most banks have
put into place to penalize the careless among us.
3. Be aggressive collecting accounts receivable.
If you do any of your own billing, you must never neglect your accounts receivable. You’ve earned that money, you have a right to it,
and you need it.
Dunning a late-paying debtor might not be your favorite pastime,
but setting up an accounts receivable file and following through on
late payments is as important to your financial success as the quality
of your product assortment. If your customers learn that you are cavalier about money owed to you, you can be certain they will stretch
your patience—and your cash flow—to the limit.
4. Maintain a cash cushion.
Try to keep enough cash in interest-bearing accounts to cover normal
operating expenses for three to six months. While that’s not always
an easy thing to do, it can provide invaluable peace of mind and
self-confidence when revenue is down during a market slowdown.
Also, keep in mind that your cash cushion is silently making money
for you in those interest-bearing accounts.
Go with the Flow
Eight techniques that can help retailers manage
cash flow for improved net income.
• Make a great impression.
• Keep customers coming back.
• Handle daily challenges.
• Pet Retail Basics
• Engaging Customers
• Customer Satisfaction
• Suggestive Selling
• Cashier Service Basics
It’s a breeze.
© 2017 PIDA