Cash Flow In Your Single-Owner Retail Store

Cash flow in your single-owner retail store is crucial to success. Large corporations open stores in new territory knowing that they will have to operate at a loss for about 5 years. They, however, have the resources to absorb the loss and bounce back to robust sales. The small businessman – not so much. Chances are, you depend on profits from your store to pay your store’s bills as well as your own. Here are some basics about cash flow for the small to medium retail store.

Cash Flow Chart

Most business advisors recommend that you develop a cash flow chart or cash flow statement. This is best done before you ever start your business, but it is never too late to build your chart. This chart will track all of the money that flows out of your business, and flows back into it. For your cash flow chart, consider:

  • Monthly fixed expenses (rent, bank notes, etc.)
  • Monthly variable expenses (utilities, inventory, etc.)
  • Sales projections

If you are starting a new business, your cash flow chart should also include:

  • Startup costs
  • One-time expenses

You can find many templates for cash flow charts on the internet. Some are free, some cost a little, but they can help you organize your information all in one place so it is easier to manage and gives you a better overview.

Revenue Forecasting

Startups will have a bit of a problem with revenue forecasting. You have to be able to look at previous years’ sales to forecast this year’s sales.

You can, though, enlist the help of a business planner. Some universities offer this service free of charge. Their services include:

  • analyzing market trends
  • predicting market movement
  • gathering historical data in your specialty area

Impulse Buying

Just as impulse buying in “real life” can break the bank – or load the credit card – so it can break your business. Buy only what is crucial for your store. If it will not increase your profits in real dollars, don’t buy it. For every purchase, consider the cost vs. benefit.

This goes hand-in-hand with developing a budget. Stick to your budget, and never forget the break-even point that is quickly approaching.

Break-Even Point

A small business break-even point is the point at which you are making enough money to pay your bills. There are charts available from that can help you determine your break-even point. It helps to keep track of your sales on a daily, weekly, and monthly basis. This enables you to more fully realize your break-even point, turning your store into a money-making venture.

Collection Problems

Many small retail stores have problems collecting from customers. Having a good POS in the store can make a big difference. Also, set firm policies concerning whether or not you allow customers to take an item home for approval. While this has been a common practice in the past, the shop owner has little recourse when the customer fails to pay.

To get customers to pay more promptly, you can offer a small discount. You can offer a 2% discount if paid within 10 days. If you ship orders to customers, use PayPal or encourage the customer to accept COD for a small discount. This way, they will not receive the item unless they pay for it.

It is also important to let customers know that you realize they have not paid. Send invoices and late-payment notices promptly. If you don’t, the customer will move you to the bottom of the “pay now” list, and you’ll have an even harder time getting your money.

Broaden your payment options. If you don’t take PayPal, sign up for it. Get a Square so that you can take credit card payments with your iPhone. One retailer, while at the grocery store, chanced to meet a customer who was delinquent with a payment. The customer said, “Oh, I’m so sorry, all I have is my charge card!” to which the retailer whipped out his Square and happily provided the customer the convenience of paying onsite.


The amount of markup you place on your products is up to you. You need to study the market in your area to see what it will bear. But, your markup should cover your overhead costs. Figure your own time, as well.

Some store owners believe that if they receive a discount from the supplier, they should pass that discount on to their consumers. Keep in mind that your vendor is rewarding YOU. It is a “thank you” to help your business. You can pass that discount on to customers, but don’t lower the perceived value of your product. You are probably better off keeping the cash. Develop your own reward system for loyal customers, rather than passing savings on to the general public.

Secure a Line of Credit

Most individually-owned businesses survive by getting a line of credit. This is a more or less permanent loan that allows you to borrow what you need, up to the limit, and pay it back. It is more or less a separate account that you can use and refill. This will also help you during seasonal surges, when you need to bulk up your inventory, but need to pay your vendors before the sales season hits.

Cash Reserves

In business, as in life, you should have enough cash in reserve to keep you going for three to six months. Every business has a slow season, and you will need this security blanket to get you through the slow times. Make it a priority to replenish this cushion as soon as business picks up again.