Cash Flow - A make or break Proposition! Part II

CASH FLOW – A MAKE OR BREAK PROPOSTION!(Part II of two)
by: Randy Snyder

Part one addressed some aspects of improving Cash Flow! Part two is a continuation of those common sense methods. If you have not read part one, I suggest you refer to that posting on Salesheads. It was posted on Tuesday September 7th.

Control your inventory!
Money tied up in inventories that become increased in age and required drastic markdowns dramatically impact cash flow! Retailers and manufacturers are extremely vulnerable and guilty of this problem. Budget and monitor inventory turnover ratio (goods sold divided by the average value of inventory) making sure it is on budget and within industry norms. Old and outdated stock must be cleared out though end-of-season sales turning stale and oft times useless assets into liquid ones. This may require selling off inventory at below cost to improve cash flow. “Old merchandise tying up valuable stock space and not salable at current prices has no value until it is sold at the prices needed to move it out.” “The right price on an item is determined by what the customer will pay for it, not what you have it priced at.”

Check your prices
Take price adjustments, both increase and decreased as needed! Price must keep pace (increases) with rising cost, either cost of goods or cost of doing business. Check your competition making sure you are competitive. Being competitive may mean increasing, not only decreasing prices! Remember, good service and services offered can justify small price differences between you and your competition!
(This could be an entire other article and quite a good one!)

Consider leasing as opposed to outright buying of assets
Over the long run, leasing is always more expensive. However the immediate cash flow benefits of leasing may have its benefits. Leasing may free up cash flow for the other expenses you have (operational) of running your business. Also leasing of equipment etc. that is in rapid obsolescence may be a better option than buying outright and having to replace it before the normal depreciation write-off period! Lease payments are a business expense, so there are tax benefits as well.

Don’t buy until you get the best deal!Bottom line is don’t spend money needlessly. Comparison shop for products that make you unique and where “having the lowest price is all that matters.” Buy in bulk to get breaks for long shelf life items. Check all deliveries carefully to make certain you’re getting exactly the quantities you ordered, at the price you ordered and deliveries are within the window you’re requested. If an item can be value and price enhanced by value adds that you can deliver, take that into consideration!

In closing, healthy cash flow is about making every penny count. Everyone that touches an item to be delivered from the very thought of purchasing and everyone that gets involved in the selling of the product must be dedicated to that ideal. If your efforts and energy expended lead to better cash flow, pay off, you are on your way to improved profitability and longevity in business!

Randy Snyder is a weekly contributor to Salesheads. His credentials are too numerous to mention in this article comprised of many executive management positions in major specialty chains and 12 years of consulting on both franchise development and chain re gentrification. He can be contacted at rsnyder921@aol.com or (p) 828 290 7557.