Owning your own retail store is challenging, rewarding and an extension of your personal brand. On a consistent basis I hear that businesses in general are trending upwards. Traffic is increasing and sales are gaining momentum. Learning to scale back short-term expenses and making do with less has been the natural order to keep things afloat in our professional lives. Now that you see an increase in transactions on a more reliable basis, you feel you are regaining control of the business finances. If that’s the case, then why is it that struggles still exist in paying your vendors and meeting payroll?
The long-established ways of measuring your revenue in accounting terms is sometimes confusing and often conflicting. Every dollar your company earns minus all expenses is considered net income. Although your net income may look healthy, you might wonder why you feel you’re living month to month and a hair’s breath away from putting personal funds into the business to keep things going.
The piece that’s missing is that your cash flow shows the real heart of your business and how you are doing. For instance, say at the end of the month you’re left with $150 in net income, but you owe $300 in payables on the 5th of the next month, with no receipts due until the 10th. You are essentially cash flow negative by $150 for 5 days.
Many a shrewd business owner has been caught in this negative cash flow scenario. You may want to maintain a regular practice of updating your cash flow forecast to compliment your income projections to get the true picture of where you stand. Stay ahead of surprises like when the cash doesn’t arrive in the bank at the right time and avoid sacrificing your fresh inventory. Be realistic in your business planning to give yourself the best chance at warding off issues before they start. In addition, take the next steps to reevaluate the validity of your plans for business growth by reviewing its structure, confirming its strength in the marketplace, and ensuring the long term success of your business.
Like this article and want more? Join me live in my masterclass. Discover the knowledge you need to be confident in your numbers and create a profitable store that makes you a fantastic income and a proud shop owner! Sign up now!