Cash Flow Tips to Help Every Retail Small Business Grow  

From evolving consumer trends to labor shortages and seasonal fluctuations, retail companies face unique challenges regardless of size. In fact, the industry has one of the highest concentrations of small businesses. According to the National Retail Foundation, the vast majority – more than 98 percent – of retail workers work for small businesses with fewer than 50 employees.

For these smaller companies, getting access to capital in order to grow their business, and managing cash flow is a necessity. The fourth quarter is an especially critical time of year. Nearly 75 percent of retailers report that the fourth-quarter is their most profitable time of year. At the same time, more than half (65 percent of online retailers and 60 percent of brick-and-mortar retailers) report their costs increasing by 25 percent on average. To curb common challenges, here are tips that can enhance cash flow.

Maximize Your Deductions to Minimize Taxes

Many small business owners are generally familiar with some of the small business tax deductions that can help you save money at tax time, but did you know about Section 179? This tax break for small businesses is intended to make it more affordable for small companies to buy business equipment, such as furniture, vehicles, computers and other tangible capital investments. Small businesses can deduct the full value of qualifying business equipment purchases up to $1,000,000 in the same tax year that the purchases are made. This alleviates the pain of depreciating (or deducting the amount in portions) on a year-by-year basis over the useful lifetime of the equipment. To take advantage of Section 179, consider your long-term equipment needs and consider making purchases before year-end to save on your taxes later.

Consider Your Funding Options

Since banks often require old bank statements and dated tax returns it can be challenging for business owners lacking long credit histories to get access to funding. On top of this, small businesses are oftentimes overlooked by banks favoring bigger companies seeking larger loans.

Many small business owners have begun using online lending platforms that look at their live data to approve funding. These innovations allow for wider and more varied types of business loans, faster access to working capital, and evaluation processes that consider a company’s current business performance instead of dated documents.

For example, despite having 10 years of industry experience, Trish Dill, the owner of Desert Signs in Phoenix, Arizona was turned down by a traditional bank for a small business loan. Through an online lending platform, Trish was able to get the funding she needed to buy the equipment that helped her operate her business more efficiently and take on larger projects. The short-term loan also allowed Desert Signs to expand its advertising and increase its customer base.

Streamline Your Supply Chain                                                                                                     

Consider different ways you can cut down on supply costs like taking advantage of bulk purchasing discounts, buying from the manufacturer directly or automating inventory management with the help of software.

Maryla and Darek Bosek caught the entrepreneurial bug in 2004 when they were working in real estate. As they saw more kitchens getting outfitted with granite countertops, they realized they could build a business around the trend. They opened Factory Plaza outside Chicago, and started traveling to China to build relationships with granite quarries. By importing directly from the quarries, they were able to cut out the middleman and cut prices significantly.

Years later when they expanded their product offerings to include kitchen cabinets they were disappointed by the quality of imported cabinets. They decided to shift the production in-house so they could control the process entirely and deliver an exceptional product to their customers. By setting themselves apart from their competitors, they were able to grow their business exponentially. In the next couple of years, Maryla and Darek hope to add another $2 million in sales from cabinets alone.

Find a Mentor to Help You Weather the Ups and Downs

Most small business owners learn how to manage their cash flow challenges through trial and error. You can reduce common mistakes by seeking advice. A mentor or advisor can help you keep an eye on your longer-term goals, anticipate upcoming expenses, and give objective advice about cash flow issues. A 2018 survey of small business owners found that an overwhelming majority (92 percent) believe that mentors have a direct impact on the growth and survival of their business. Yet, only 22 percent of small businesses owners reported having mentors when they started their business. For those searching a mentor, try connecting with industry contacts on LinkedIn or visit your local Small Business Development Center. The SCORE Association’s “Counselors to America’s Small Business” is also a great program that matches volunteer business counselors with aspiring entrepreneurs and business owners.

Aditya Narula, Head of Customer Success, Kabbage