Tag: finance

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Managing Cash Flow

manage cash flow

With 2023 in full swing reach your financial goals by effectively managing cash flow.

Cash Buckets

The first step to managing your cash flow is to open six checking accounts, each named for their purpose: income, inventory, profit, owner’s compensation, taxes, and operating expenses are a great place to start. Opening multiple checking accounts prevents you from overspending in significant areas.

Next, you’ll have to prioritize money for certain expenses. This will help you save money for inventory, emergencies, taxes, etc. To avoid overspending, make purchasing decisions with the funds available in your account for that category. If the account is empty, wait for it to be replenished.

It’s important to stay in a rhythm. This means to avoid spending frenzies when cash is available allowing you to breathe easier when cash is in a pinch.

Reviewing Spend

Every two weeks, transfer the money in your income account to your checking categories based off pre-determined percentages. Every quarter make an extra payment on your debt, profit distribution, and taxes.

Also evaluate your pre-determined allocations quarterly. Some adjustments will likely need to be made. Finally, review the plan with your financial adviser annually to reach your financial goals.

Inspiration for this post comes from “Reach Financial Freedom” by Jacob Curtis published in the December 2022 issue of Creative Retailer.

If you’re looking for more information to guide you in owning a retail business, subscribe to Creative Retailer today. Already a subscriber? No worries—join our Facebook group for insights and dialogue from industry specialists like you. And don’t forget, you can always purchase single issues if you prefer that instead.

If you still can’t get enough, register for the Creative Retailer LIVE Spring 2023 event May 2-4 in Pawhuska, Oklahoma for opportunities to learn from peers and network with industry professionals.

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Budgeting for Inventory

inventory budgeting

Are you spending money you don’t have for inventory? Continue reading to learn how to avoid this financial situation.

Budgeting

To avoid overspending set aside a portion of every sale in a separate account to be used specifically for inventory. If the account is empty, do not order inventory (even if a calendar reminder is telling you to do so). Once the account has money in it, the first thing to cover are orders placed but not yet paid.

To determine how much of each sale to set aside, check last year’s cost of physical goods. Then compare that as a percentage of your total sales. If you can’t find this information, anywhere from 40% to 45% is a good place to start.

Note, this account is for inventory only, not classes. As you use this system ensure the account has enough funds for basic products, as they are the backbone of your inventory.

Inventory Scheduling

Another piece of inventory is when the product arrives. The first thing to avoid is feast or famine, meaning you don’t want all of your product to arrive the same day. That means you won’t have anything new to stock your shelves with for the next three months.

To avoid this, inventory tracking is essential. Once you know how long it takes a product to ship, you have the option to contact the vendor to deliver when you need it. Most vendors are flexible on delivery dates after payment, as the sale is what matters most to them.

The other option is to cut your order. If you know the order isn’t arriving for two more months, take a look at the list and determine what you can do without.

Inspiration for this post came from The Not-So-Obvious Basics of Buying by Gwen Bortner published in the October 2022 issue of Creative Quilt Retailer.

If you’re looking for more information to guide you in owning a retail business, subscribe to Creative Quilt Retailer today. Already a subscriber? No worries—join our Facebook group for insights and dialogue from industry specialists like you. And don’t forget, you can always purchase single issues if you prefer that instead.