across the world
Best Practices for Retailers to Maintain Steady Cash Flow during COVID-19 Crisis
As most countries have come under a partial lockdown situation where consumers avoid human contact (with most people not coming out of their homes), retailers are striving to adapt to the dramatic market changes. They know the circumstances change with each passing day and don’t have much time to respond. All these factors lead to cash flow crisis in the retail industry.
Considering the importance of accounting for retailers, they are rethinking and changing how they manage their accounts and cash while trying to go ahead, assessing, and improving their current cash position.
Many in the industry are dealing with disturbed economic strength and reviewing their overall financial stability; if required, they are ready to get help from lenders for financial support and experts in retail accounting and financial management.
However, let’s get further and read what key people of different businesses tell us about their efforts in maintaining steady cash flow.
1. Offer Discounts and Encourage Repeat Business
Jessica Rose, Chief Executive Officer of Copper H2O
I am the CEO of a 100% female-run e-commerce social enterprise in the health and wellness industry. In my experience, the most important thing to help maintain steady cash flow in your retail business is to encourage repeat business.
We do this by maintaining a list of past customers who are open to receiving periodic email newsletters from us. These newsletters provide valuable information regarding health and wellness issues and also occasionally advise our customers of new product offerings at our store.
If a business ever finds itself with a cash flow issue, it can be very effective to send out a newsletter such as this offering customers a discount on new purchases. This benefits your customers while also hopefully facilitating a quick infusion of cash into your business to help keep your cash flow steady.
2. Allow Payments to be made in Installments
Andrei Vasilescu, CEO and Digital Marketing Expert of the Dontpayfull
COVID-19 pandemic has made a great negative impact on the finance of almost everyone. The purchasing capacity or frequency of most people has reduced due to reduced income. Offer special discounts to attract your target audience and customers to show that you’re really concerned about them. For your special deals or discount offers, your customers will buy their required things from you to save their money in this tight situation.
In addition to the special discounts, allow your loyal customers to pay you in 2 or 3 installments for orders above a certain sum. This easy payment option will keep your customers purchasing from you and continue your cash flow. The priority of requirements has been drastically changed due to this unprecedented pandemic. You should expand your product range according to the new requirements of your customers to maintain your cash flow.
3. Focus on Customer Needs
Nicholas Holmes, Founder of Product Reviewer
Problem: Not forecasting cost-efficiency
Since the pandemic has come, we have failed to have the right stock purchasing processes and have faced the cash flow problems since then. As we were unable to predetermine what is going to be in need and what is not, we end up with inventory mismanagement problems that ultimately disturbed our cash flow.
Solution: Made open-to-buy plan and allow partial payments for invoices
The best solution we come up with handling the inventory problems was an open-to-buy plan where we first consider the needs of customers for the upcoming 6-7 months. We then manage and replenish the inventory to the optimum level throughout the time to hand over the orders before time to our clients/dealers.
To keep the business running, we make sure that every invoice is 100% paid on time, but as the crisis took over the global economy, it has become so hard to get the 100% payment on time. So as a solution, we came up with partial payments rather than a single payment. With such a payment method, we successfully stabled our cash flow streams.
4. Liquidate Stocks
Gintaras Steponkus, Blogger & Marketing Manager at Solid Guides
In the initial COVID days, the buying patterns disturbed severely. Many products that were in-demand post-pandemic were useless after the COVID-19 wave. Our executives decided to liquidate such stock as soon as possible. We got less profit on those stocks, but it was better than wasting them or selling at a loss. Selling a massive stock at once on minimized profit, but the profit was reasonable collectively.
Additionally, selling stock to liquidation companies saves the business reputation as everything happens behind the scenes. In return for the profit, we invested in the “running” products. As a result, our sales and ROI increased dramatically.
5. Practice Invoice Factoring
Michael Hammelburger, CEO at The Bottom Line Group
One advice that we give to our retail clients is practice invoice factoring. This is done by having a business forward its outstanding invoices to a firm in exchange for immediate cash. The firm then pays an advanced partial payment as soon as an invoice has been issued. The customer then pays you the remaining balance with a small fee.
Likewise, we also advise them to allow their B2B clients to settle for partial payments and then arrange the balance to be paid on an installment basis. This provides enough room for businesses impacted by the pandemic to adjust their finances while still making sure that cash flow is sustained.
6. The Key to More Business is Digital Marketing
Andrew Taylor, Director at Netlawman
Just through the experience of recent months, I would say that one of the key ways that you are enabling yourself to maintain steady cash flow is by reaching out to return customers and keeping that marketing push alive.
We are all so tempted to pull back on a lot of our campaigns because we believe that the people are just not there and willing to spend, right? However, reports show a different story, really. People are still spending, whether it is out of fear or boredom, and understandably, everyone is online more too.
So by even spending a little extra on your digital marketing campaigns, you are ensuring that you reach those people who are willing and happy to buy. Reaching out via a newsletter or such to return customers is a cost-effective way to maintain these relationships and pull on this revenue. By bringing out a weekly/monthly newsletter, offering vouchers, sales, or other incentives to buy, you can ensure that everyone is able to look out for everyone.
7. Handling Different Situations Effectively
Ethan Taub, CEO of Loanry
‘The one thing we looked at, ironically, was the finance that was available to us.
Faced with the uncertainty of the pandemic’s impact and the high demand in the lending world, we strategically analyzed various scenarios to maintain financial stability without resorting to cutting expenses or sacrificing available lines of credit, prioritizing open communication with potential sources of assistance. The pandemic has caused some changes for us, and cut costs, but keeping to core values is one of the best things that you can do.
8. Refocus Capital
Andrew Roderick, CEO of Credit Repair Companies
Keep your cash flow in check by scaling back what you don’t need at this time. Things have naturally been slower for most during a time that I felt the world was standing still, so consider looking after the pennies by considering freezing your accounts on things like social media scheduling programs, instead focus on tweeting as and when. It is likely you will be doing less tweeting, so you can perhaps cut this back for a while and refocus the money on keeping cash flow where you need it to be.
Each company will have different areas where they can save money, but looking after the pennies can usually help the pounds look after themselves.
9. Go Online (Subscription Model) to Sell
Cherry, Accounting Professional, YouTuber, and Wealth Coach
One way to maintain steady cash flow is to have a subscription model or membership program. At a lower than usual rate, customers will be able to receive the same products and services via a subscription model. This ensures the business has steady cash flow every month, instead of a sudden drop when a pandemic hits.
Another way is to introduce online services. One of my clients started her social media coaching business when she was laid off at her job due to COVID, and within just two months, she is able to scale that business to 5 figures a month!
With the quarantine, a lot of people are looking online to find new hobbies to kill time, and it is a perfect time for business owners to introduce online services, or even bring some of their products and services online.
10. An Option to Pause – Better than Cancelation
Daniel Carter, Founder of Zippy Electrics
As a financial advisor, I’m always telling business owner clients to offer flexible payment options to customers. One way to maintain a steady cash flow in business is to pause, not cancel accounts or subscriptions. Worldwide travel restrictions and shutdowns have slowed down economies and caused many businesses to close and many employees to be out of work. Businesses have already started slowing down.
It’s only natural for your customers to cancel some of their services. To keep them from churning permanently, provide an option to pause the subscription for a while; instead of canceling it altogether. Alternatively, you can extend the next subscription renewal date by a month or two without charging the customers.
Think carefully before offering this, though, because not all businesses can afford to continue offering services free of charge.
11. Finding Different Platforms to Sell
Nathan Robinson, Founder of Neighborhood Square
One way businesses have adjusted to keep afloat is to find different means to sell to their customers, where the regular brick and mortar shops are no longer necessary, and e-commerce websites have taken over.
This pandemic has kept people from going outside to shop, and have gone online to satisfy their need to buy products. Businesses have adjusted to this and started providing services online; some restaurants have started partnering with delivery services such as Uber Eats to cater to their customers. Businesses have also started using social media marketing to reach broader audiences to sell to, be it through advertisements, special promos, or basic content generation to create leads.
To maintain steady cash flow on your retail business even amidst COVID-19, you must be determined to practice multiple solutions, without being concerned about its failure or success. Aside from the many ideas shared above by experienced industry experts, focusing on retail business accounting and the way you handle invoices and cash can also do a great help.
At Cogneesol, we have a dedicated team of professional, trained, and skilled accountants that can help you get your financial situation back on track. We have been delivering quality accounting services to our clients worldwide since 2008. Yes, we can help you maintain a steady cash flow for your retail business; get in touch to know more about our accounting services.
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