Managing Cash Flow Because Cash Is King

Managing Cash Flow Because Cash Is King

After 8 years running a retail store and wholesale businesses, I know that cash flow is king. The only thing that over the years that has caused me real anxiety is money...not sales, not customers, not logistics, but Money!

Every year when I sit with my accountant and look at the figures, I think, "Hmmm, it’s a profitable business, it looks great, so, why do I always struggle to pay the bills? Why don’t I ever have enough in the bank to buy stock for Christmas or indent orders?"

That was until last Christmas, when a wonderful friend shared with me a book that had changed how she managed money in her business.

That book was Profit First by Mike Michalowicz.



Now if you’ve already read it, I hope it was as amazing for you as it was for me. For me it was life changing to be honest. I don’t love reading, I start loads of books that are recommended to me, get half or three quarters of the way through and get bored and leave the bookmark in there forever more!!

Not this one. I read, did the exercises, calculations and implemented everything in about 5 days. Now that is unheard of. And since then I have followed the rules, allocations and tweaking all of our expenses, and framed how to do our stock ordering, and manage our inventory.

This month after getting our act together and allocations tweaked, for the first time EVER, we have paid ourselves more than what we need to cover our bills. We have money piling up in our profit account, we have more than enough money put aside to pay our BAS and tax, and we have all bills paid AND money in our account to buy more stock when we want it.

The team have changed the way they think about customer orders and sell more of what we have, not special orders.

I had to share this with you, our retail stores, because we want you to be as successful as you possibly can be. Our range is available as you need it, so it’s good for cash flow, no indent and no packs, mean that your stock can be as lean as possible so it’s far more profitable for your business.

Do yourself a favour and order this book, read it and implement immediately.

Now, we have changed a few things from the book's structure to suit our business, such as:

  • Profit account, Tax account, Owners account, Income account just as described.
  • We have 2 expense accounts, one which is for regular overheads and the other one is for our big expenses. Our new range shipments, Christmas stock etc…
  • All of our subscriptions come off the credit card.

So each fortnight I do the calculations based on the income account. The regular expenses account pays off the credit card before it buys or pays anything else. Once I know what we have to spend then I do the store orders. So if I only have $1K in that account, I order just $1K worth of stock - if I don’t have anything then we don’t order anything. If we have $10K then we either put some more aside into the big expenses, or we go to town and buy a fortune worth of stock!!

I am so excited, it has taken quite a few months to pay off the outstanding bills and loans, now we are buying everything with cash, do nothing on account and still have money to cover our liabilities and have a nice little kitty waiting for our big bills when they are due!

I would love to hear how you guys manage your cash flow, if you have any questions or comments, please send it through, I would love to help with anything I can.