Managing Cash Flow During Quiet Times

So, the festive season is over. BFCM (Black Friday Cyber Monday) has passed, Christmas decorations have come down, everyone is back in routine and trying to get past the period that some may call “Januworry”. While all of that is happening, small businesses are still around, they still trading, they still have inventory to buy, salaries to pay and of course, rent.

The wise thing to have done, was to put money aside from the busy period (Nov – January) but sometimes the wise thing to do and what actually happens in reality, differs quite a bit.

During these quiet periods, it is very important to keep close track on money going out and money coming in. We have created a few “hacks” to help you in managing your cashflow during the quiet times of the year.

Manage your Marketing

Marketing is one of those purchases for a small business owner that the reward, or in a better jargon, ROI, isn’t always instantaneous and therefore tangible. It is a long game, especially for creating brand awareness, and in most times, very expensive. When it comes to small business owners in South Africa, the cost factor, in most cases lands up being a discouraging driving force.

Marketing is a very vital and important piece to any business, regardless of the industry. In today’s times, modern social media platforms have allowed small businesses to target their audience and market directly to them. There are many platforms where businesses can advertise. In recent statistics, out of all social media users in South Africa:

· 46.1% use Facebook

· 39.7% use Pinterest

· 9.1% use Twitter

· 1.8% use YouTube

· 1.7% use Instagram

· 0.6% use Tumbl

These statistics can help understand where to focus most on and where to spend money to reach the maximum number of users and potential customers.

During quiet times, it is best to keep the marketing expenditure to a minimum but that does not mean to stop marketing at all. It just means to market smarter by limiting the advertisements and to target them specifically at the customers you are trying to acquire.

Manage Stock Levels

When it comes to stock levels, it is always a tricky area. Having too little stock is bad and having too much stock is really bad. The only way to learn the store’s ultimate stock level is by trading experience. There is no one fixed formula that can help you get that perfect level right off the bat. You have to trade, learn the business’s operational flow and then understand par levels for each stock item.

When it comes to the quiet times of the year, keeping all stock to par levels is ver important because if you have too much stock then you will have financial and cash flow problems as too much money is tied up in stock. Also, by having too much stock, you might run into something called inventory obsolescence (you can read about it and how to manage it over here). On the other hand, if you have too little stock it can cause losing out on sales, customer dissatisfaction, lower levels of employee motivation etc. Therefore it is important to understand that par level and stick to it during the quiet times. During the festive season and busy times, it is wise to increase par levels to accommodate for increase in sales.

Extend Payables as Long as Possible

Owning your own business is a dream, but most of the time is hard work. Being a business owner means that you have to look out for yourself before anyone else. The way business works is, you buy stock for a wholesale price, and then you put a mark up on it, and then sell it to the consumer or business as your retail price. Now, the ultimate scenario is to pay for the wholesale product with the money that you received from the retail selling of that particular product. Therefore, you can pay the supplier and keep the markup as profit.

In reality, this never happens because the person who is selling you the wholesale product needs the money himself to buy his/her own “wholesale product”. So, this is where some suppliers give accounts to purchasers to allow them to buy on credit and then pay later when they have the money. Most cases, some suppliers will provide a 30 day from statement account (which sometimes if purchased at beginning of the month provide 60 days without paying for the goods).

Even though credit is something to be very careful with, it can provide the small business owner with some assistance with getting over the quiet times of the year.

Reduce Overheads

Reducing overheads during the quiet times is very important to get over these periods. Reducing staff overtimes, cutting back on water usage, electricity usage etc. All of these policies should be clearly communicated to your staff to make sure they are being implemented throughout the business.

Even though these quiet times seem like they going to last forever, they don’t, and we blink and we have Easter shopping or Valentines day which has just passed. There will always be spikes in purchasing for consumers or businesses because that is just how the economy operates and our human behavioural nature. But, being cautious about cash flow and spending during these times is important for the longevity of the business so make sure to follow these hacks and keep pushing.

“A dream doesn’t become reality through magic; it takes sweat, determination and hard work” Colin Powell

If you need assistance with cash flow, please contact us here and we will be able to assist.

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