Cash flow is the lifeblood of any business and that includes retailers. But in this sector, cash flow management is especially challenging because retailers are dealing with razor-thin margins, seasonal fluctuations, volatile prices, inventory management, aggressive competition, fickle consumer tastes and onerous conditions for financing.
“Cash flow management can make or break a retailer,” says Mark Templemore-Walters, Operations Director at Cash Connect, a leading provider of cash management solutions and a member of the Connect Group of fintech companies. “Retailers need liquidity not only to ensure they pay debt, rent, employees and suppliers on time, but also to take advantage of opportunities to grow their business.”
Templemore-Walters outlines six ways retailers can improve cash flow management:
Optimise inventory management: Leading retailers are moving towards a just-in-time (JIT) inventory practice to reduce excess stock. They are also proactive about discounting or liquidating slow-moving inventory. In addition, retailers can benefit from aligning supplier payment due dates as closely as possible with sales cycles.
Diversify the business: Diversification can help a retailer to ensure that money is constantly flowing into its business. For example, retailers can expand into complementary product lines or services to bring revenues in during quieter times of the year. A retailer could add a bistro or coffee shop to drive footfall into its store. Or it could offer installation and maintenance services for electronics and white goods.
Use specials and promotions to attract customers: Promotions, discounts, and loyalty programmes can help a retailer to attract and retain customers. This, in turn, can ensure that there is a constant flow of money into its tills.
Implement automated cash management: Most retailers still receive the majority of their payments in notes and coins. They can put a ‘bank in their store’ in the form of a robust retail cash vault. With a leading automated cash management company, they will benefit from next-day, same-day or even real-time settlements of the cash that they deposit in their vaults.
Retailers have access to the cash in their bank account, before it’s collected by Cash-in-Transit (CIT) and while the cash is safely stored in the cash vault. Automated cash management solutions are four times faster than a manual cash handling system. Thus, they enable retailers to increase business efficiency, in addition to improving cash flow.
Leverage fintech business funding solutions: Some cash management firms will offer retailers frictionless and quick access to opportunity capital up to R5 million in just 24 hours. This short term fintech business loan can be repaid in small daily instalments instead of a large debit order at the end of the month. The daily instalment comes straight from the cash in the retail cash vault (or bank account), so that retailers do not feel the impact on their cash flow.
Put an ATM recycler in the store: An ATM recycler is a robust cash vault, recycler and dispenser in one offering. Retailers can pay lower cash in transit and cash deposit fees by recycling the cash they receive into the ATM—with much of the cash that customers draw inevitably used to pay for purchases in the store. Retailers get a rebate on each successful card withdrawal, boosting their profits
“In the retail sector, effective cash flow management requires careful planning, continuous monitoring, and the ability to adapt to changing market conditions,“ says Templemore-Walters.
“Retailers need access to cash and an efficient operating environment if they are to thrive and outsmart the competition.
“With a reputable, automated cash management solution, they can save up to 40% in time and money as all forms of manual cash handling are minimised, shrinkage is eliminated and back-office cash handling costs are reduced. Retailers can access their cash in the retail cash vault in real-time, whenever they need it, and even pay suppliers from their cash vault using an app, at the click of a button.”