10 Finance Tips All Retailers Should Follow

Luke Loftin
Luke Loftin
Guest Contributor

Whether just starting out or eyeing additional growth for an established brand, retail is a tough business in which to succeed. Here are ten financing tips to help you on your journey, regardless of the starting point.

Do you own a retail shop, or  thinking of starting one? Here are 10 tips you should follow to make sure your business starts, and remains, on firm financial footing. 

1. Don’t Go Big

When you are just starting out, you may be tempted to get the biggest space you can. However, the fact is rent is a major line item for any business, and ideally you want to keep costs as low as possible, especially in the beginning. Instead of aiming for your dream space right away, try to find a more modest one that offers you a good location, but costs less. By reducing your overhead when it comes to rent, you free up your money to take other financial risks, or to invest back into your business. Then, as your business grows, you can always move into bigger digs if you outgrow your first space.

2. Pay Up

You don’t want to get a bad reputation among fellow business owners as someone who is always late on payments. Instead, make it a point to always pay your bills on time, or even a little early if possible. In fact, many vendors offer small discounts, such as two to five percent off, for customers who pay early, so take advantage of those savings. Conversely, if you pay bills late, you are likely to get hit with late fees, which could have a negative impact on your bank account, and potentially cause you to fall behind with other vendors. Make it a point to pay on time (or even early) every time, as cash flow allows.

3. Keep Accurate Financial Records

If you don’t know how much your retail business is spending and how much it is earning, it’s practically impossible for your business to function for long. The key to any successful business is accurate bookkeeping. That means maintaining financial records through an accounting software program. If you aren’t good with finances or are simply strapped for time, hire a bookkeeper to track your finances. However, that doesn’t mean you shouldn’t be looking at the books yourself. Learn how to read a balance sheet, and make sure you understand your business’s cash flow.

4. Invest in a Point-of-Sale (POS) System

Savvy retail owners know that one of the best investments they can make in their business is acquiring a point-of-sale (POS) system, which can manage transactions, accept credit card payments, track inventory and provide reports. Most POS systems will also integrate with your accounting systems, simplifying bookkeeping. The ability to easily track inventory also greatly streamlines the process of inventory management, since you’ll instantly know when stock is low on a popular item, or see which items simply aren’t selling.

5. Shop Around to Lower Credit Card Service Fees

Accepting credit cards is a necessary part of running just about any retail business. However, it will cost you every time a customer swipes her card. That’s because credit card companies all charge a small processing fee. The amount charged varies from company to company, so it’s a good idea to do some comparison shopping to make sure you are getting the best rate possible. Also, don’t be afraid to ask for a discount. Most companies have some flexibility when it comes to rates, and may be able to offer you a lower rate to gain (or keep) you as a customer.

6. Analyze Your Seasonal Cash Flow

Most retail stores experience dramatic cash flow changes based on the season. Almost every retail store can count on a boost in sales leading up to Christmas. However, other boom or bust times will vary based on a variety of factors, including your location and the types of products you sell. For example, a swimsuit store will likely be busiest in summer, while an outdoor clothing store might be busier in the fall and winter. What’s important is you understand what times of year money is steadily flowing in, and other times when your cash registers start to collect dust. Understanding the cyclical nature of your cash flow can help you better budget so you set aside enough money during your busy season to get you through those slower months.

7. Budget for Major Purchases

Another advantage of understanding your cash flow is that it can help you better budget for major expenditures your retail business needs to make, such as purchasing a new POS system or store fixtures. By setting aside money during your busy season, it allows you to budget for big-ticket items you might otherwise struggle to pay for during your leaner months. One way to do this is by taking the amount of money you need for a purchase and then building it into your budget and annual forecast. This will give you an overview of your overall spending, and also help you decide if you can afford to make a major purchase now, or if it needs to be postponed.

8. Save Up for a Rainy Day

In other words, start an emergency fund. While it’s a good idea to save up and budget for major purchases, you can’t always predict when you’ll need to buy a new piece of equipment. Your trusty laptop could go on the fritz, or your brand’s delivery car might break down. It’s better to have emergency funds on hand to pay for these urgent needs when they crop up rather than scramble to come up with the money on the fly. And, depending on the situation, it might even impact your business’s ability to function, which could further eat into your cash flow, exacerbating the situation.

9. Get Insured

Your entire livelihood is likely tied up in your retail shop. Should the building catch fire, or a customer slip and fall on the icy sidewalk out front, it could put you out of business. That is unless you have insurance. Business insurance can protect your business against common threats such as property damage or third-party injuries. For example, property insurance could pay for damage to your shop (if you own it), as well as your inventory, fixtures and business property, such as your POS system, office furniture, etc. A general liability policy could pay for the medical bills of the customer who got hurt on the sidewalk, as well as any legal bills should they sue you. Other policies that can potentially benefit a retail store include cyber liability insurance and workers’ compensation insurance. Talk to your insurance agent to find out what policies might be right for your business, along with what retail risk mitigation and loss prevention solutions might help with your rates. 

10. Get Cash

Starting and running a retail business is expensive, and sometimes you might need a cash infusion to help you through a particularly slow time, or if you need to make a major purchase and don’t have enough cash in reserve. Fortunately, there are multiple financing options available to help you obtain the funding you need for your store, from credit cards to invoice financing to small business loans.

About the writer: Luke Loftin is a blog writer and an award-winning indie filmmaker. When he isn’t writing about himself, he specializes in finance and health, blogging about all sorts of topics including credit cards, personal loans, bank accounts, and the digestive system. He currently writes for LeadsMarket among other sites, and his articles are scattered all across the information superhighway. You can find him on LinkedIn.

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