We are asked regularly for business advice by small business retailers. It comes with the territory of being a small business focussed POS software company. It also comes with us owning and running retail businesses ourselves.
We draw on 0ur own experiences as well of those we serve in providing advice.
A question we have had recently is about how yo manage a cashflow challenge in a small retail business, a tough challenge, one that could end the business. Here is our overall advice for that situation:
The common approach we have seen from business owners is to hide from those to whom you owe money. That only serves to harm your business and put you under more pressure. It is not a smart move.
- Understand the problem. Know if it is short term or long term. Be certain about the role you have played. If you don’t understand the problem your fix may be inappropriate.
- Own the problem. It is personal. It is about leadership. Fixing this is on you.
- Develop a plan and document it succinctly:
- To borrow if appropriate.
- To put more of your own money into the business.
- To cut overheads: labour, rent.
- To convert more stock to cash.
- Work our what free cash you have availabke from your weekly trading.
- Ensure all creditors receive payments, no matter h0ow small. Regular payments reflect your commitment to goodwill. They also show you are not playing favourites.
- Talk to your creditors, apologise, outline your plan, ask for help.
- Act. Every decision, every action you take must work to addressing the cashflow challenge. If you have created a plan(point 3 above) act on it immediately. This is not a time to overthink things.
- Invest. If your cashflow challenge is because of a decline in traffic, not spending money chasing traffic will only make the problem worse.
If your cashflow challenge is more serious than a short to medium term plan could resolve it could be that your business is insolvent.
Company directors have a legal obligation to not allow their businesses to trade while insolvent.
Many have been in this situation. You can come out the other side by acting sooner, with commitment and with transparency to your creditors.