Holiday Money Management
Cash is king, especially during the holidays. It is important to remember that sales do not equal cash in the bank. There is often a timing difference between expenses being paid and income coming in; like when merchandise arrives in October but customers don’t purchase it till December. Luckily there are some tricks to help you sell sooner, get paid faster, reduce expenses and defer payments. It is important to remember that cash flow is money coming in instead of going out.
One great way to sell sooner is to offer deals or discounts to those who purchase and pay for services or products early in the season before a certain date like Nov. 15. You will have a lower profit margin but you will have cash sooner. Another way is to have early season sales by holding special events or offering special deals during the holiday rush. This will help customers buy earlier, turn over more merchandise and ultimately improve cash flow. The last option is to sell gift cards. This is making the sale prior to the customer purchasing the actual service or product. This is a great way to get more cash now.
Getting Paid Faster
One of the great ways to help you increase your cash flow is to accept credit cards. Usually you get the cash in your bank account the next day. Now you do have to pay a small transaction fee but it could be worth it to not worry about checks bouncing or invoices not being paid. Did you know that about 58 percent of people will avoid a business that doesn’t accept credit cards? Another important thing to remember is the mobile nature of business nowadays. There are some great mobile credit card readers that can be used with cell phones and tablets. Another way to deal with cash flow is to request pre-payment or payment on delivery which will help eliminate invoices and delayed payments.
Another way to help improve cash flow is to reduce your expenses. This can be done by purchasing carefully and understanding the market and what will sell. Reducing the waste in inventory by not over purchasing and watching what you are spending on shipping materials and delivery costs. Another important factor is to review and read financial statements and forecast your costs. It is important to forecast what you will need in terms of products, staff, and supplies for this holiday season.
It is important to review and negotiate your payment terms. The ideal terms would be between Net60 and Net90. If this is not an option, you could try asking for installment payments over the next 3 to 6 months for large purchases. Another way to defer payments is to pay with a credit card.
It is important in this changing economy to create a holiday expense budget. You will need to estimate your cost for inventory, supplies, marketing and advertising, staff, holiday cards and gifts, décor, added utilities, shipping and delivery and any other expenses you might incur. A great way to do this is to review last year’s sales and what sold and when it sold.
Check back tomorrow for the final tip in this series on how to make your success this holiday season last.
Los Alamos Business Assistance Services helps businesses with planning, marketing, financing, startups, training, and other specialized areas so businesses can start, grow and succeed in northern New Mexico. Visit our website www.losalamosbusiness.comfor a no-cost, confidential appointment.
Source: Holiday Success Guide. Abrams Rhonda. The Planning Shop, 2012.