Good retailer cash management

Posted on: 27 January 2014

We’ve heard it all before: cash is king. But are retailers giving cash management the attention it deserves?

In the same way that people need to regularly review their finances, you should regularly review the cash in and out of your business. So here are our six recommendations to help manage your cash flow.

Look back:

  • Learn from the last few years’ trading in your business, your local area and national statistics to work out when there were peaks and troughs in footfall, what products sold well and what discounts you gave and when. But don’t get blinded by the data – use your instinct to make informed conclusions about what really happened. For example, the timing of school holidays may have had an impact.
  • Public holidays like Christmas and Easter mean that payments in and out will have been different to more typical months. So look at the impact of these on your daily bank balance and the timing of outgoings like salaries, loan repayments, utility bills and insurance premiums.
  • Review how promptly you received payment from debtors, the terms of payment your suppliers gave you and when you actually paid. Assess where you made short-term cash savings and decide if they paid off for the business longer-term.


  • Make a monthly cash flow forecast for the year ahead. If you don’t have accounting software, use an Excel template to get started.
  • Careful management of your cash flow will ensure you have enough money in the bank to stock up before busy periods. It also helps you spot trouble coming before your bank balance runs into the red and you have to buy an expensive last minute loan or, worse still, cease trading during a busy time of the year.


  • If necessary, ask your suppliers for longer payment terms and find out if you can temporarily lower monthly repayments on long term debts. Choose which bills you’re going to pay first. And there’s no harm in asking creditors if you can skip a payment, make a partial payment or lengthen your payment terms. They can only say no.
  • If you’re choosing new suppliers, don’t automatically go for the cheapest option – those offering more flexible payment terms may be better for your business in the long term.
  • And make the most of electronic banking by paying bills online on the last day they’re due.

Debtor management:

  • Retailers don’t usually have significant debtors, but if you do, think about reducing your payment terms as long as it doesn’t jeopardise your relationship – you don’t have to offer 30 days just because it’s the industry norm.
  • If you offer customers credit, perform appropriate credit checks. If they’re your best customers, consider asking them if they can accelerate payment or ask for a deposit.
  • And remember that debtors could take three weeks off over Christmas so call them in early December to find out when they expect to pay your invoices. Chase any unpaid debts before they have the chance to hold onto your cash until the new year.


  • Having cash tied up in stock can be a small business’s worst nightmare. Especially if that stock isn’t selling. Invest in good stock management software to buy in what’s popular and avoid being left with lots of undesirable stock. Sell old stock at a reduced price and replace it with goods that you know your customers want now. The last thing you want is for them to leave your shop empty handed only to buy your out of stock products online elsewhere.
  • Think carefully about when to discount and by how much. For example, some retailers start the ‘January sales’ in November, thus helping shift stock rather than rack up the costs of holding it. Can your margins cope with discounts this early? And will a small discount now avoid a larger one later?


  • Arrange a loan or increased overdraft with your bank manager long before cash actually becomes tight, and only use it if you need it. They’re more likely to oblige if there’s no immediate need from the business.
  • Prepare for interruptions to trade in your shop, such as from bad weather, by knowing how you would manage your cashflow if you couldn’t open and what steps you could take to get back up and running as quickly as possible. And don’t forget that small business insurance can help you recover from lost income.

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