Rarely, if ever before, will retailers be more pleased to see peak season approaching on the horizon. While recent years have all presented their own challenges, the longer economic pressures persist, the impact will continue to be felt on consumer spending and, therefore, business cash flow. Peak season provides an important opportunity to alleviate those pressures.
Whether it’s Black Friday or the Christmas rush, Click Frenzy or the Boxing Day sales – or even just the longer days and warmer weather that keep highstreets business for longer – there are plenty of opportunities to improve your short and medium-term cash flow. But with persistent inflation and ongoing consumer uncertainty, you must be proactive and strategic.
Establishing cash flow
One of the biggest causes of business failure is poor cash flow. Improving cash flow – earning more from sales than you spend on wages, bills, delivery, materials etc. – needn’t be daunting. The easier and more cost-effectively you can drive sales, while simultaneously managing costs, the better.
A positive cash flow has the potential to help guard against dips in sales, spot opportunities for strategic growth, improve relationships – and even commercial terms – with suppliers, and more. Ultimately, two key things should be paid attention to: managing your inventory effectively and strategically and ensuring that each sale generates a healthy gross profit.
Inventory management
Your inventory is one of your most important assets, and if you’re strategic with it, it will work just as hard for your business as you do. It might sound basic, but a great approach is to focus on selling products that customers want and that offer healthy profit margins.
Niche products or those with slim margins can quickly become problematic. If you stock 10 items, and five you sell regularly and generate, for example, a 200% margin on each, while the other five sell sporadically and have a 20% margin, focus on the first half.
Understanding how your inventory performs is crucial. By using a point of sale system, like Lightspeed, you can generate detailed reports to identify which products are selling well and which aren’t, as well as which items have strong or weak profit margins. Forecasting is essential too, especially for seasonal retailers. Anticipating which products are likely to be popular is vital to decide what to stock and in what quantities.
For example, your best-seller in recent months might’ve been a beanie hat and your worst-seller a beach towel, but based on both historic sales pattern and foresight, it can be easy to deduce which product to stock and which to drop in the coming months.
When you analyse and forecast like this you can avoid having too little inventory to meet demand or ordering excess stock that can only be moved with steep discounts. Irrespective of the size of your business, and what you sell, the more strategic and data-driven you are with your inventory, the easier it can be to improve your cash flow.
Using inventory management software and techniques, you can connect directly with suppliers, avoid stockouts, streamline ordering, and track inventory, centrally, across all channels and all your locations.
Cost management
There are also potential incremental gains to be generated through expenses like rent, phone, internet, and salaries, plus retail-specific costs like your delivery networks or suppliers. It’s not always easy – or even advisable – to look for a cheaper option, but regular audits can be hugely valuable.
For example, many telco providers offer better deals to prospective customers. Or can you better optimise your staff schedule, using sales data, for example, to ensure you’re not regularly overstaffed on slow weekdays and understaffed at peak times?
Technology costs are another area worth examining. The right technology can help you cut costs and increase revenue. Instead of relying on a patchwork of disconnected systems – each with its own costs and complexities – why not consider integrated systems, like Lightspeed, which offer solutions in one, including payments, point-of-sale, marketing, loyalty programs, inventory management and more?
As peak season approaches, there are plenty of reasons to be optimistic. However, economic uncertainty persists, so effective cash flow management is still essential. By analysing and strategically managing your inventory, identifying sensible cost-cutting strategies, and leveraging powerful, cost-effective technology, you can be better placed to improve cash flow before, during and long after peak season.
Simon Le Grand is senior director of marketing for APAC at Lightspeed.