Smart Alternatives to a Retail Business Loan

By: Randy Hernandez | Chief Marketing Officer

Retailers face a number of challenges when it comes to managing cash flow over time. A huge number of factors can affect business that are simply not in the control of the business owner. For example, an unexpectedly warm winter can leave a boutique with a surplus of coats and cold weather accessories. Or a new trend comes along that requires maneuvering the budget to take advantage of customer interest. It can be tempting to reach out for a retail business loan, but is that the best long term answer?

Effective planning and digging down into the financial reality of your retail business can help keep cash flow under control and manage debt, too. Here are some ways smart planning can be the antidote to a retail business loan.

Cash Flow Projections and Careful Planning

Cash flow projections can help retailers understand the ebb and flow of their income and costs over the short-term and long-term. Granted, there is some “educated guess work” in putting together these projections, but seeing the difference between the projections and how reality rolls out day-to-day, week-to-week, even quarter-to-quarter is where learning happens.

Working with your accountant can be helpful in setting up a smart system. As your projections and daily reports come together, strategic decisions can be made about where to spend and save money. For example, if your cash flow projections predicted 20% of your operating costs are dedicated to staffing, yet you quickly realize you are spending closer to 35%, adjustments can be made to scheduling, payroll, and the budget to bring things in line.

SCORE offers a number of useful templates for business planning, including this 12-month profit and loss template.

Use these cash flow projections in conjunction with your overall budget planning to see if there is a gap between your expectations for cash flow and your true operating costs. Managing any difference will help your budget stay healthy over time, but also expect the unexpected. After all, surprises both positive and negative can affect cash flow planning.

Stay Profitable with Smart Pricing

Are your products priced as strategically as possible? Retailers know that psychology is a huge part of finding the price that pleases both the shopper and their own business needs. Everything from the display and lighting to the time of day and week can affect how a shopper perceives pricing. At the end of the day, the price needs to be high enough to cover the cost of the product and associated services - with a little profit, too.

Pricing must consider all of the fixed costs your business accrues beyond the cost per unit. These include rent, payroll, utilities, and insurance. Taxes are another consideration. So while you might be paying $3.00 per unit for a product, your true costs might run closer to $7.00. Profits start with smart, inclusive pricing.

When you need to discount inventory, keep careful records. Understanding supply and demand, and resulting markups and markdowns over several seasons will help you avoid overstocking and will help keep your business nimble in the future.

Smart Inventory Management Tech for Savvy Planning

Even in the last 12 months, leaps and bounds have been made in inventory management software. Consider your POS system as a starting point. Many systems now integrate completely with your website and mobile sales, multi-location sales, and ordering software.

Reporting tools have become even more robust as inventory management software becomes more able to handle real-time reconciliation with your physical inventory. Look for an inventory management program that integrates directly with Quickbooks, Xero, or your accounting software. Again, planning and keeping track of details will keep your retail business more profitable.

One of the benefits of an integrated inventory management system is greater security and theft control. When every item is tracked, from your warehouse and storage through the display floor and sales, employees will understand that the chances of being caught are greater. The unfortunate reality of employee-theft is a major drain on profits with an annual cost of up to $60 billion per year for retailers in the United States.1 Using real-time inventory management software will help you spot any losses quickly.

Inventory management software can also help your retail business manage returns, track discounting and assist you in optimizing pricing strategy and tactics . Again, this technology can help protect your profits with detailed reporting to help you spot trouble.

Meet with Your Accountant Regularly

When you schedule regular meetings with your accountant, you will have a chance to ask questions and double-check your reporting with a professional. Managing cash flow, budgets, and tax obligations takes ongoing, systematic planning. By showing your books and reports to your accountant regularly, is great motivation for keeping  updated. Sometimes a second set of eyes is truly valuable.

Furthermore, your accountant is a great resource for any changes that might affect your retail business, especially for tax and payroll issues. Ideally, you should choose an accountant who has demonstrated expertise in working with other retailers. He or she would be more likely to be up-to- date on the best practices in inventory management, tax opportunities, and issues of most concern to retailers.   Meeting on a monthly or quarterly basis with your accountant is a great way to give your cash flow management a quality check-up. Planning carefully with a professional is an important part of managing the long-term financial health of your business, including any debt you may have.

It is sometimes completely necessary, and possibly even beneficial, to take out a retail business loan or find alternative business funding solutions. Still, there are also a lot of strategies retailers can use to manage their assets. Careful planning and attention to the everyday financial details of your retail business can protect profits and keep your bottom line growing.

However, we also live in an uncertain world...and emergencies or unexpected opportunities that don’t line up with the cash on hand s happen all the time. When you do need to find retail funds quickly, Jet Capital can help with fast, flexible merchant advance funding tailored to your business. To learn more about how our merchant advances work click here.

Apply online today or give us a call at 866-845-9674 to learn more about our merchant advance funding.

  1. Leinbach-Reyhle, N. (2015, October 7). New Report Identifies US Retailers Lose $60 Billion a Year.

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