When budgets are squeezed, it pays to look closely at the flow of money in and out of a retail business – and technology is likely to play an important part in managing any changes, writes Deputy's David Kelly …
The pandemic-driven restrictions brought financial challenges to both the consumer and the producer in 2020. A lot of people had to cut back on spending and make sure they'd have something set aside in case of an emergency since they were no longer earning, and many retailers also had to cut back on expenditure in areas such as staff/labour amidst uncertainty about revenue and outstanding obligations like rent.
Going forward, store owners need to take stringent measures in regard to how they allocate funds, seeing as there are no guarantees that they’ll soon be back to pre-Covid sales.
If you’re a furniture store owner wondering how you can stay afloat, let’s break down a few budgeting tips to help you weather the storm …
Separate fixed, semi-fixed and variable costs
Your fixed costs are those expenses that remain the same regardless of whether you made any sales or not. On the other hand, variable costs change depending on how much you sold in a given period of time.
When business is going well, you might take care of certain costs before others with no worries, since you know you’ll hit a particular sales target within a designated time. With sales dropping significantly, it is important to split these types of costs because it will help you identify compulsory expenses (like rent) so that you can come up with a clear figure of how much you’ll have to make – say, within a month – if you’re to stay open for the coming months.
There’s no reason you should be taking out ads for the next three months when you only have rent for the next month. It’d be better to put part of that ad money into securing at least two extra months in your space, and, if there’s anything left over, it can go to paying for ads to last a few weeks.
Reshuffle your workforce
Start by quantifying the foot traffic you’re receiving in your store and the corresponding number of people you need to cater to the visitors. Follow that up by pinpointing your peak hours that require the highest number of workers present.
Restructure your shifts to make sure that you only have as many staff members as necessary in the store at any time. The underlying idea is that you should be able to reduce the amount you’re spending on labour if there’s a reduction in the number of goods you’re moving.
To make the most out of workforce reshuffling, make sure you opt for a solution that enables you to forecast the number of staff members needed, make quick replacements when necessary and automate timesheets to smoothen payroll, among other actions.
Your tool of choice should also come with other features like instant sharing of rotas with your team, managing annual leave and tracking wage costs, all simplifying day-to-day administration while ensuring that you stay within your budget.
Keep cash near
During a downturn, it is extremely important to make sure that your business has easy access to cash – especially for the smaller retailers who may easily be thrown off by a sudden need for extra cash.
The first step is to visit a loan officer and find out what makes you eligible for a loan. After ascertaining that you qualify for one, set up a line of credit so that you’re prepared for any cash flow issues down the road. Make sure you have a solid relationship with a banker, as this proved helpful to those who were trying to access PPP loans during the earlier part of the pandemic.
You should also set up other sources of cash to back up this option, or in case you don’t qualify for as much credit as you need. These may include drawing from your personal savings, borrowing from family members or liquidating an asset you own.
Study your inventory
As tough times set in, it is crucial to revisit your inventory records and look for turnover patterns. List down the products that have previously been known to move much slower. Check your recent sales to find out how many people are still demanding them.
The goal here is to readjust your orders for the next season, focusing more on sourcing fast-moving products. You can even put more emphasis on recurring high-activity periods like the festive season, where it’s easier to know what kind of products move faster and how to entice the customers.
The longer some products sit in your store, the more you have to scramble to fill the gap in funds that was caused by purchasing, storing and advertising them.
Change your estimates
One simple trick that can be helpful when budgeting for your retail store is to alter your estimates for sales and expenses. It is better to assume that you might sell way lower than you normally do in a coming period and that there might be surprise expenses that drive up your costs. The benefit of using this approach is that you won’t be getting anxious when you move fewer products on certain days since you’ll still have some money left over after taking care of expenses.
Embrace technology
Where possible, migrate your records into spreadsheet software. This gives you a more holistic view of your business’ financial health, enabling you to find opportunities to save in areas where you normally wouldn’t look.
You should also remember that budgeting is a continuous activity, and therefore your first attempt may not be the most effective one. With software tools in place, you can easily revisit previous versions of your records and discover where to double-down or ease up a bit.
While you’re looking for items to trim, it is vital to remember that there is such a thing as overdoing it. In every business, there are expenses that seem dispensable but are actually integral to achieving consistent sales. This is why you may need data outside your expenses, such as the amount of exposure you get from different aspects of your marketing campaign.
If you get more visitors because of your social media ads rather than traditional broadcast media (TV and radio), you might want to consider keeping them around.
Identify all the tiny parts of your service that have a tremendous effect on customer satisfaction, and find a way to keep them alive. Businesses that cut back too much eventually start to look underfunded, and it becomes harder to convince customers that your brand still delivers the same quality it used to.
David Kelly is the general manager for Deputy in EMEA. Deputy offers a cloud-based platform that simplifies the complexities of shiftwork. Its aim is to create thriving workplaces in every community – more than 250,000 workplaces around the world trust Deputy with creating business efficiencies, while improving employee experience.
