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Managing Cash Flow

Cash flow is the availability and movement of money in and out of the retailing business. If you are in the early stages of operating the business or still drafting a business plan, it is natural to have a negative cash flow for a couple of months. What you need to maintain is a positive cash balance to support everyday expenses. Eventually your cash inflows and outflows should keep pace with each other and then you should experience more inflows towards a positive cash flow. Otherwise, you will suffer a cash flow gap, or the difference between the amount of inflows and outflows. To avoid this, you must be active and aggressive in collection and impose limits on credit card use.

Positive cash flow

Positive cash flow

When the time comes for you to really tighten your belt, you have to look for ways in reducing your retailing expenses. Identify the areas where you may cut costs such as professional fees, banking services, and shipping. Also, identify the items you can do without such as donations, magazine subscriptions, and janitorial service. Cutting costs is especially effective in the presence of an economic crisis or the threat of competitors.

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