- February 11, 2023
- Posted by: simba001
- Categories: Business Insights, Reatil POS Insights
One of the most fundamental principles for running a successful retail business in Kenya is cash flow management. There’s a reason why cash is often labeled “king”. It’s the very thing that keeps your company going. It keeps the lights on, enables you to pay your staff, and gives you the means to do great things for your customers. And for obvious reasons, you need to have enough cash flowing through your business in order to survive and thrive.
Unfortunately, a variety of factors (the economy, bad business decisions, global pandemics, etc.) have put many retailers in a cash crunch—a situation in which you don’t have enough funds to operate successfully or normally. If you find yourself in this spot, don’t fret. There are a lot of steps you can take to get out of the crunch and free up cash in your business.
There’s a reason why cash is often labeled “king”. It’s the very thing that keeps your company going. It keeps the lights on, enables you to pay your staff, and gives you the means to do great things for your customers.
What is cash flow?
Cash flow is the amount of money that’s going in and out of your business. The flow of cash is initiated by two things: Money coming in thanks to your customers making purchases and money going out through business expenses such as your inventory, staffing costs, operating bills, etc.
Healthy cash flow happens when you have more money flowing in, while the opposite scenario — i.e., having higher expenses and not enough income — puts you in a cash crunch.
Cash flow is the amount of money that’s going in and out of your business.
How to improve cash flow
Now that you have a basic understanding of cash flow, let’s discuss how you can improve it. Below are some action steps for freeing up more cash in your retail business.
Many retail businesses in Kenya have their cash tied up in inventory, which is why the #1 thing that you can do to improve cash flow is to ensure that you’re stocking the right products and selling them at a healthy profit, consistently. If you do end up with excess stock, take immediate steps to liquidate.
Here are some tips for doing all the above.
Spread out your purchases
Most retailers purchase wholesale products at least six months ahead of when they will be sold in-store. Don’t forget to save some of your budget for last-minute trends and to restock unexpected best-sellers.
Improve the value of your inventory
Retailers can look into boosting the value of their stock. This essentially means that you can deliberately focus on selling high value stocks to increase total turnover.
Liquidate excess inventory
Put them on sale
“Excess inventory is the number one place where retailers lose steam (and money). Take time to see what you have in stock and start pulling it out of hiding.”
The most straightforward route to moving excess merchandise is to put them on sale. Bring out the slow-moving items from your stock room, mark them down, and put them on the sales floor. Yes, doing so will minimize profits, but it will at least help you free up space (and cash).
Bundle them with other products
If your slow-moving merchandise can complement your other products, why not bundle them together? It can add value to the sale and help you unload excess inventory.
See if you can sell them as impulse purchases
This tactic works best for small, handy items. If it makes sense for your store, try to sell these items as impulse buys by displaying them on your counter or cash wrap or by putting them in sale bins either at the entrance or near the checkout area.
Offer them as free gifts
Instead of trying to make money directly from your excess merchandise, see if you can use them to generate sales for fresher items instead. You can, for example, give them away when a customer meets a certain purchase threshold (i.e. “Spend $50 and get a free gift!”).
