How can retailers take control of their cash flow as peak season approaches?

In today's uncertain economic environment, where retailers are facing inflationary pressures, fluctuating consumer demand, and higher interest rates, effective cash flow management is crucial. With peak season approaching, there will naturally be opportunities on the horizon, but that shouldn't stop retailers from being proactive, deliberate and strategic. Especially when considering that today's pressures could continue until 2025, according to KPMG's Australian Retail Outlook.

Whether they're omnichannel or pure play, have multiple outlets or a single location, there are ways for retailers to take control of their cash flow and build sound, sustainable financial foundations.

Key cash flow management
First, it's important for retailers to establish a positive cash flow; when their business generates more income from product sales than its outgoings, like wages, bills, delivery costs, and product costs. A slow or negative cash flow is one of the biggest contributors to business failures - which could mean positive, reliable cash flow could be one of the best antidotes to it. 

Retailers can improve their cash flow by effectively managing and quickly turning their stock and ensuring the gross profit they are making on each sale is healthy. Monitoring and maintaining a healthy gross profit margin on every sale will ultimately allow enough cash to flow through the business. 

By establishing a positive cash flow, retailers can protect against sales shortfalls, identify areas and opportunities for strategic growth, improve supplier relationships, create a stable, healthy environment for employees, and even set aside rainy day funds to help if issues arise in the future.

Practical inventory management tips 
Few things contribute more to cash flow than careful inventory management. It may sound over-simplified, but one of the simplest ways for retailers to approach this is to sell only products that people want to buy and products that have healthy gross margins. If products are too niche or margins too small, retailers can run into issues quickly. 

For retailers, understanding the performance of their inventory is critical. Using a point of sale system, retailers can create detailed reports to understand which products are and are not selling, and which products have healthy and unhealthy margins. 

Understanding what products are, or might be popular - think about seasonal trends - is important for retailers to understand what to stock and how much. Otherwise, they can be left with not enough products to fulfil their demand, or - potentially worse - excess stock that it can only shift with significant discounting.

Many of the retailers - big and small, across Australia - who have established a healthy cash flow today are using inventory management softwares and processes that allow them to directly connect with suppliers, avoid out-of-stocks, streamline ordering and track inventory across all their channels, in all their locations, from one hub. 

Cost-cutting strategies 
Whether it's rent, phone, internet or salaries, there are many fixed expenses across the course of a financial year that, if not cut, should be monitored closely and regularly. That's in addition to the retail-specific expenses like shipping fees, material and stock purchases. Understanding what costs can be better controlled can bring incremental gains that can make a big difference. 

'Can I improve my fixed internet or telecommunications costs by switching providers?'. 'Does the bricks-and-mortar footfall justify my rent?'. 'Can we better optimise our rostering, to ensure we're not understaffed on a busy Saturday and over staffed on a slow Tuesday afternoon?' These are just some of the questions that could yield cost-cutting answers. 

Then there's technology costs. Through the right tech, retailers can both cut costs and generate revenue. Rather than relying on multiple different siloed solutions - each of which has its own costs and complexities - there are platforms, like Lightspeed, that offer multiple integrated solutions, from payment and point-of-sale to marketing, loyalty and inventory management. By consolidating around a vertical technology stack, many retailers today are saving costs in the short-term and maximising opportunity and efficiency in the medium- to long-term.

In the current economic environment for Aussie retailers, effective cash flow management isn't optional, it's essential. By strategically managing inventory, identifying sensible cost-cutting strategies, and building their operations around powerful technology that doesn't break the bank, retailers can build the foundations for long-term success.