Cash flow. If there is one thing that will keep you awake at night, its cash flow.

It really is the life blood of any business. Because without it, there is nothing. When the cash is flowing, the business has a future. But when its in short supply, life can look so bleak.

So where has the money gone?

1. Too much stock
Small Retailers are unique from other small businesses as most of their assets are tied up in stock. But while its essential for generating cash its also easy to get it wrong. There´s always something to buy and what seems like a good reason to buy it. But carrying too much stock or the wrong mix consumes valuable cash. Fast. Your cash could be hiding in broad daylight disguised as stock.

cash flow the lifeblood of any business2. Excessive price markdowns
In an attempt to turn the stock back into cash it is all too easy to resort to excessive price markdowns. But while this is important, It doesn’t resolve the cash problem because you´re not generating full margins on these sales.

3. Margin erosion
When price markdowns are excessive, margins are affected which can have a serious impact on cash flow. Margin erosion is the slow, steady decline in margin percentage. So as this is happening, there is simply not enough cash being generated to cover the cost of the excess stock, much less the other expenses of the business.

3. Excessive payroll
Keeping your payroll under control can be easier said than done and its easy to understand why. When sales take a dip, it can be really difficult to lay someone off or cut back on someone´s hours. Instead of making the hard decision, you may start thinking of other areas that could be cut instead. By then though, your cash flow could be under pretty intense pressure.

4. Poor planning
¨By failing to prepare, you are preparing to fail¨. The wise words of Benjamin Franklin are so true. A retailer who plans is a successful retailer. Fact. If sales and stock levels haven´t been properly planned, there´s no way of measuring how much stock should be bought each month. And if cash flow isn´t being planned, there´s no way of making sure that every month is generating the necessary cash flow to sustain the business.

So in the end it all boils down to budgeting and bench marking so that there is a dynamic plan to ensure that the business is able to provide for it´s cash needs now and to identify potential problem areas in the future giving you time to develop a plan of action. With a cash flow plan in place, you should be sleeping a lot more soundly.