- December 14, 2017
- Posted by: UpVue
- Category: Accounting & Finance Know-how, Industry Guide, Retail Shops
Are you running a retail business in Singapore? So you must be following a planned strategy to maintain your cash flow, the amount of money that circulates in your business per month. The expert analysis says, if the money coming into your business per month is more than the money going out then you are maintaining a positive cash flow for your business. But the opposite effect is really harmful to your business.
Although this concept of cash flow is much easier to understand, most people fail to manage this for their retail business. Studies reveal that retailers often collect some working capital from banks during slow seasons to cover the shortage; however, if you are good in cash flow management, you need not do this.
Now the most interesting fact about your business is that the cost of utilities and rent are fixed so you already know that you have to manage them; but when it comes to inventory, all calculations fail. Retailers often find it quite difficult to predict what will get consumed appropriately and what will just stay in the inventory store for months ahead. Bad management cost you money for the things that are not in sales.
Professionals say that if you make smart decisions about your inventory, it is possible to make a big difference for cash flow in the business. It is also possible to get positive results by simply making negotiation over invoice payment dates. The best idea is to adjust your inventory payment dates after the sale date so that you can manage a positive cash flow. Wal-Mart use the same strategy for management of inventory bills so that they can make payments from actual cash flow instead of taking help from bank loans. It allows them to make investments in other growth opportunities like new software and marketing techniques. You can also follow the same strategy for your retail business by creating the perfect balance between bill dates and inventory.
Another trouble with most retailers at Singapore is that they try to track their Profit and Loss statement every month and use this analysis to run the business ahead. But the issue is that P&L statement is actually related to past of your business; however, you have to develop a strategy for your future. For example, if in one month you had great sales record, you will likely be excited to buy more inventories for next month. But in case if sale slows down and the bills have a same due date, you will find it little difficult to manage the cash flow.
It is high time to understand that higher level of cash flow doesn’t mean higher profit levels and similarly, higher cash flow is not equal to high profit. You have to use appropriate accounting software to analyze all essential details for your cash flow management. Once you are able to track manage the balance between expenses rate and current sales, you will find ways to survive in this tough market.