Is Your Cash Flow Healthy for Black Friday?

Retail Finance and Accounting

We’re a few months away from Black Friday, which is the biggest day in retail business. And you don’t need to be an MBA to know that the concept of Black Friday is perhaps the best illustration of how effective financial planning can either make or break your small business.

It’s also the day in which retailers emerge out of “the red” (debt/loss) and into “the black” (profit.) It underscores the fact that certain industries are seasonal or cyclical and financial managers need to plan accordingly. And cycles swing both ways. Retailers bracing for the Black Friday stampedes must make sure they have enough inventory in stock and enough staff to sell it. But oftentimes the pendulum swings the other way, whereby small businesses are caught unprepared and faced with critical cash shortages.

Of course, there is help for planning out your sales forecast and make sure that you are ready for your business with inventory on-hand. An experienced hand can prepare the necessary financial statements and engage in even the most basic financial planning so you’ll have a firm understanding on your cash needs. Your historic trends combined with industry insights provide with valuable benchmark and combined with your businesses marketing initiatives, we can take an educated guess on traffic to your website, cart adds, and conversion. You need to know what kind of deals will be viable both financially and creating a long tail for your retail business. Merchants do not have an excuse to be not prepared for the biggest sales time of the year.

Now, you would think small businesses would realize the importance of the tremendously obvious fact that unexpectedly running out of cash is a bad thing. But it’s fairly common, and when you consider all the other challenges small businesses face, it’s actually forgivable. That’s because many small businesses and start-ups simply don’t understand the concept of cash flow. If they do, they may lack structured processes to manage it – in other words, they balance the books on the back of a napkin. This may work for a few weeks or months, but it’s certainly not a sustainable strategy, especially as the business grows.

So why do some small businesses opt to go it alone? We’d like to posit one obvious reason: money. Small business owners look at hourly accounting and finance rates and figure they can do it themselves instead. But of course, time is money, and oftentimes small business owners simply lack the time to not only effectively manage these finances, but also keep up to date with ever-changing IRS regulations.

That said, there are instance where this do-it-yourself approach can make sense for a small business owner. Their business may be very small and its business model straight-forward. The owner may have experience in financial management and is proficient in QuickBooks or Excel. In these instances, outside help may not be needed. But once the equation changes – a new office, new employees, unexpected growth – business owners need to make sure their own management of their firm’s financial affairs isn’t consuming valuable time that can be devoted to expanding the business. Furthermore, many small businesses that are experiencing growth may be doing so for the first time: it can help to have an experienced financial expert assist them in navigating these unchartered waters.

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  • GrowthForce

    Many businesses who experience seasonal inflows of cash (i.e. the holiday season or the summer), don’t spend enough time planning for their slow seasons and making sure they have enough cash on reserve. Enlisting outside help, not only works to keep the books balanced, but can give the company guidance on how to capitalize on their slow periods.

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