Navigating Holiday Cash Flow: A Retailer’s Survival Guide

Introduction: The Seasonal Cash Flow Crunch

Catherine Erdly: Do you find that this time of year your cash flow is tight? If so, you’re not alone. And that’s what we’re going to be exploring in this episode. Why this time of year is particularly difficult for retailers and what you can do about it.

Hi, I’m Catherine Erdly. I am your host today of the Resilient Retail Game Plan podcast. I’m also a small business and retail expert and the founder of Resilient Retail Club. That is my membership group and mastermind for product businesses. You can find out more at resilientretailclub. com.

I have been in the retail industry for 24 years now.

Understanding the Retail Cash Flow Pinch

Catherine Erdly: And one thing I can tell you that holds true is that this time of year in particular, September, October, heading into November is a really, really tight time of year for many people.

So what I would like to do is first of all, share a message that if you are feeling the pinch this year, if you’re feeling like your cashflow is tight, then you’re not alone. This is not down to some horrible failing on your part. This is down to the realities of seasonal businesses.

So in this episode, we’re going to explore why the end of October is often a pinch point for cash flow, what contributes to the crunch, and then also, importantly, we’re going to be looking at some practical ways to weather the storm and come out the other side stronger.

Welcome to the Resilient Retail Game Plan, a podcast for anyone wanting to start, grow or scale a profitable creative product business with me, Catherine Eardley. The Resilient Retail Game Plan is a podcast dedicated to one thing, breaking down the concepts and tools that I’ve gathered from 20 years in the retail industry and showing you how you can use them in your business.

This is the real nuts and bolts of running a successful product business, broken down in an easy, accessible way. This is not a podcast about learning how to make your business look good. It’s the tools and techniques that will make you and your business feel good. Confidently plan, launch, and manage your products, and feel in control of your sales numbers and cash flow to help you build a resilient retail business.

The Impact of Holiday Preparations

Catherine Erdly: So, quite simply, October is a difficult time because most people will have spent money getting ready for Christmas. So, we are just about to head into the November silly season when it comes to discounting, and also the golden weeks, so that’s the six weeks in the run up to Christmas, the ones from mid November all the way up to Christmas.

That is the time where many retailers may get as much as 50 percent of their annual revenue during that time. So because of that, you have to stock up. Most people are not able to get stock in during this busy time because they’re trying to secure products with their manufacturers or with their suppliers.

And so as a result, you have to physically bring it in.

Now, if you’re ever wondering if big retailers have this, then absolutely. I used to spend a lot of my time actually jiggling around with the warehouse intake. So for example, when I worked to coast, before it became part of Boohoo, It was owned as part of the Aurora group and we were in a four brand warehouse with Oasis Warehouse, Caramel and Coast.

And there was this crunch point where all brands wanted to get their stock in at the same time. And we used to have to play around and work out moving Containers and trucks and all sorts of stuff around to basically get it at maximum capacity every week So we could get everything in.

If you’ve ever noticed Supermarkets massively increase their capacity for holding stock during christmas. You’ll start seeing Christmas seasonal products piled up on top of the shelves from pretty early on, almost end of August, early September.

And I remember before I worked in retail, I never could get my head around it, but definitely sure that what it is is that the amount of stock that these big retailers have to get out into their stores for these big holiday periods is so immense that the only way that they can cope with it is to ease it out over time.

So in other words, all big retailers have this same issue.

The other thing that I like to point out is that the phrase Black Friday, what I was always told when I worked in retail in the U. S. was that it was called Black Friday because that was the point of the year where the retailers went into the black, so they’d been running at a loss for the rest of the year.

And basically everything points to the fact that this is an extremely lean, difficult time. And I worked for paper chase. We used to have to work with the finance team every year to basically do what we could to push. It was called pushing payments past peak. And every single day that we could get extended on payment terms or every single way that we could slightly smooth out the payments so that weren’t all coming out at the same time was something that the entire Buying teams, merchandising team, design team, we all shared responsibility for trying to get that smoothed out and help manage these payments.

So it is not something that you have done wrong. If you have a pinch point at this point, everybody does. Big retailers do, small retailers do. It is a very nerve wracking time when you’ve got all of your stock in and you’re waiting, especially if you’re somebody who’s extremely seasonal, you may have a lot of stock in ready to go and now you’re sitting there waiting.

So it can feel very nerve wracking at this time of year.

Strategies for Managing Payments

Catherine Erdly: What I want to do in this, episode is first of all, just highlight the fact that this is not your fault, but also let’s have a think about some of the ways that you can improve things.

And I think one of the big lessons that I learned from being in a big retailer was that timing really does matter.

So every timing of every payment matters may not individually, but cumulatively it makes a big difference. Therefore, If you’ve already paid for your stock, there’s not much you can do. If they’ve got any ability at all to smooth any of those payments out with your suppliers, ask them if you could split them into two and pay them half and then half.

And this is not to put them in a difficult position. If obviously if you can’t, then you can’t, but it’s always worth asking. And it’s something to think about for the future. Is there any, uh, possibility of getting slightly better payment terms from your suppliers, especially in return for placing a larger order.

So that is something that I want you to be thinking about. Every single payment matters. And that also includes payments into you. So if you are owed money at this time of year, whether or not you are, how it depends on how quick you are to ask for your invoices. I know a lot of people feel nervous about this.

But if you are in a situation where your cash flow is tight and there are people who owe you money, then you need to ask for it now, especially if it’s overdue. So let’s say you’ve got a corporate order or a wholesale order that has gone out and you should have received payment and you don’t. Make sure you have really good records.

Always keep records of who owes you what money. Make sure you are asking for it because as I said, When cashflow is tight, every single transaction effectively matters. So have a look at what you can ask for, what is owed to you. Do not be shy. If it is owed to you, then, then definitely ask for it. And if you have got any opportunities at all to push some payments, then it’s always worth asking.

It’s again, it’s not about putting big pressure on your suppliers and being a terrible person if you don’t pay them in full. The truth is, is that you’re unlikely to be a really big fish to most of your suppliers or manufacturers. So it’s not like you are going to be forcing them or strong arming them.

It’s not like, you know, a big supermarket that’s squeezing their supplies for every penny. This is about you as a business owner, just seeing what you can move around and what you can try and get a bit of breathing space. Any other payments that are due? You can ask if, even if it’s not stock, are there anything, anything else that you can either delay that you can maybe put through in the first quarter of the year?

So maybe you say, okay, actually, if I’ve got the choice of, an expense now or in January, then go for January. And just basically almost like first things first, if cash flows tight, making sure that any money that is owed to you, you’re getting and any payments that you know that you have to make you see if you can, even if you could break them down slightly, even if you can pay 20 percent a bit later, as I said, every single transaction matters and cumulatively it can have a big impact.

So what else can you do? So. One of my favorite tasks to do with business owners, especially people in my mastermind is work on a cashflow forecast. A cashflow forecast is a spreadsheet where you’re mapping out what your sales are predicted to be, as well as plotting in what your bills are and what you want to spend on stock.

Creating a Sales and Stock Plan

Catherine Erdly: The sequence of events, if you like, is you need a sales plan. To be able to do that because you need to know how much is going to be coming in. You also need a stock plan to know how much you’re planning on spending. And then once you’ve got your stock plan and your sales plan, you can set yourself up a cashflow where you can forecast how much is going to be coming in on a weekly basis, how much.

How many bills you’re going to have coming out, what your stock payments are going to be and how much you should be putting aside for your VAT and for your taxes. And that’s personally how I run my business cashflow. And it is so helpful because I have complete visibility. I usually set it up a year in advance, so I have complete visibility.

Obviously you have to forecast your sales and you have to adjust it as you go to actually happens, but it is a huge, just absolutely crucial for me. I couldn’t run my business without it, and it is really helpful for the people that I have worked with to set those up for them because it means that you can navigate your way through these difficult times.

It can also give you a really clear indicator of When you are going to have these pinch points and it might help you make decisions about when you’re going to make payments. If you’ve got any flexibility and you’ve got visibility of what you can do in terms of your payment schedule, then you can really navigate your way through difficult and tight cashflow times in a way that you just simply cannot if you don’t have that visibility.

Importance of Cashflow Forecasting

Catherine Erdly: So a cashflow forecast for me is absolutely crucial.

The issue that I have with a lot of cashflow software out there, I have actually spent quite a lot of time looking for really good small business cashflow software. A lot of them are set up for service businesses. They’re just not really set up for product businesses.

And yes, there’s cashflow inside people like QuickBooks and Xero have cashflow plugins, but to be honest, I’ve never seen one that does just exactly what I want it to do other than the spreadsheet, the template that I have. So if you’re in the resilient retail club, there is a cashflow template in the grow your profits course.

The last module talks about cashflow template, but it is absolutely just so important for small businesses, small product businesses, especially to navigate through these tight times.

So that’s the ideal really is that you get yourself something that can be set up for the next three months. However long you want to set it up for to help you navigate through and to help you, as I said, fine tune it.

Cause often cashflow timing is so, so critical. The more you can get sales in early, or the more you can push payments later, then that will just help you so much. So I definitely recommend doing that.

Optimizing Stock for Better Cashflow

Catherine Erdly: The second thing I would say is really have a look at your stock. So when people come to me and they’re in a cashflow pinch, one thing I always like to look at is what are they actually sitting on?

How can you use the money that you’ve already spent on stock how can you use that to help boost your cashflow? So What I mean by that is have a look at what you’re sitting on, what stock you’ve actually got in the business, what you’ve already spent. Is it working as hard enough for you as possible?

My new service Stock Doctor, which we have been launching, which is getting really fantastic feedback where it’s a done for you service.

That was one of the things that we focus on identifying, you’re presented with this is the stock that isn’t working for you hard enough. You’ve already spent this money. Let’s make sure that you’re getting the sales from it that you need.

Strategies for Managing Excess Stock

Catherine Erdly: So with your cashflow, it can be tempting to think it’s all about getting that newness in. And there is always an element which newness is great. It’s helpful. It’s important for getting people in, but cashflow often is exacerbated by too much stock. And so one of the things that you can do is try and be leaner in your inventory. So make sure you’re not overpurchasing. Make sure you’re being really clear about is this the best seller that I’m rebuying or am I going to let it sell out?

Make sure that you’re really clear about whether or not this is something that you’ve only got a really short period of time to sell.

Planning for Seasonal Inventory

Catherine Erdly: For example, one of the Christmas brown bananas, as I like to call them things that will be totally undesirable on the 26th of December, those things you do not want to buy too much of, because that will really not help you with your cashflow when it comes to January, you want to really strike a balance between being prepared and not tying up too much cash in stock.

The other thing to think about is what can I do with this stock? What could I do? What can I tie it into , an offer at this time of year, for example, an offer that is not brand damaging because it’s really focusing in on very specific. products that is directing the customer behavior towards certain items.

That is really what you want to be looking at. You want to be really thinking about how can I use this stock to help ease my cashflow issues right now? It’s not like, you want to touch anything you know is going to sell at full price during your Christmas time period. Again, you want to have a look at your stock, go through it, say, right, this stock here, I’m going to have some items, which I know for sure are going to sell at gifting.

So I don’t want to touch those. Those are my prime stock. I’m not going to do anything with those other than just shout about them. But then I’ve got these other items that are really super slow. Right. I really need extra cash right now. Could I do a subscriber only offer or percentage off or something or just some way of trying to shift these items ahead of time so that I know that I can clear through them or alternatively, you may decide, actually, I’m going to keep my powder dry, as we used to say in the retail industry and save all of my big bang discounting for a larger offer around black Friday. It’s up to you, but you need to be thinking about what have I got? What have I already spent money on and how can I use that to help ease my cash flow?

Final Tips for Cashflow Management

Catherine Erdly: That’s it short and sweet this week. I just wanted to highlight that this is a crunch time. But everything that you can do to map it out will help to give yourself that visibility.

And On a more long term scale, having a sales plan and a stock plan allows you to really clearly plan your purchasing so that you’re never going to be able to necessarily get around the the situation where you’re going to have this pinch point at this time of year, but it will help you plan for it.

And the other thing as well is if you have a stock plan, the reason that I am so adamant about having stock plans for businesses is that it avoids it where you’re running on too much stock most of the year and then you pile on more stock for Christmas And then you’re in a really really tight spot. Imagine if you had kept your stock much tighter throughout the year So you had that extra cash and then that additional money going out for christmas would not be such A blow or such a big burden.

So proper stock management throughout the year really helps alleviate this overstock situation at Christmas, as well as having, the ability to then really plan out how much you should be spending or will be spending on stock at a certain time, which helps you with your cashflow forecast. But the key thing really is not to blame yourself.

This is a very common phenomenon in the retail industry.

Resources and Support

Catherine Erdly: There’s lots that you can do if you want to know more about managing your stock. I do have my membership group where we have the tame your tiger course, which is based on my book, tame your tiger. You can also read the book. If you know that you want to manage your stock better, but you don’t have the time, then check out the stock doctor service.

You can head to resilient retail club. com slash stock doctor and have a look. And we can have a chat about how it can help you. And that way all of your stock management is taken care of, but definitely think about how you can. Map out what you’re going to be spending and think about how you can help yourself with every single transaction can make a difference.

Make sure that any money is that is owed to you is coming in and see what you can do to, to manage your payments as best you can. And the most important thing, keep selling, just show up, keep selling. Don’t let fears about your cashflow get in the way of showing up and presenting yourself to your customer and being excited about your products and getting out there and really pushing it for a successful Christmas season.

If you’ve got any questions about today’s episode, do drop me a note on Instagram at resilient retail club. And of course, if you have a moment to rate and review the podcast, that’d be a huge help. And of course, if you like or subscribe, you’ll be the first to know about every new episode that comes out on a Thursday morning.

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