Ever feel like your till’s ringing, but your bank balance is whispering “not this month”?

I’m Catherine Erdly, and this episode of the Resilient Retail Game Plan gets painfully real about the truth behind cash flow for retailers.

If you’ve ever panicked at 3am, wondering how to pay that looming supplier invoice, you’re not alone.

I break down my “SHOPS” framework;

Sales, Having It Mapped Out, Overheads, Profit, Stock.

Turning the messy, anxiety-inducing side of product business finance into a clear action plan.

This is practical product business advice forged from 25 years on the retail shop floor and in boardrooms.

If you want genuine independent retailer tips from a UK retail podcast, you’re in the right place.

Let’s keep talking:

DM me on Instagram @resilientretailclub—share your next cash-flow move, or nominate a guest for the Resilient Retail Club Podcast. Drop a follow or review in your favourite retail podcast app. Want more shop owner know-how? Check out my latest Forbes article on funding options for indie retailers UK (link in show notes).

[fade out as a spreadsheet cell totals up, quietly but with that perfect clack]

Mentioned in this episode:

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Cashflow Planner Freebie

Download your Cash Flow Planner at https://resilientretailclub.com/cashflow

Sales are coming in, but bills are going out faster.

If you've ever woken up at 3am and wondered how are you going to cover

the next bill or felt like you're constantly robbing Peter to pay Paul,

then this episode is for you.

Welcome to the Resilient retail game Plan. I'm Catherine Edley and in the

next few minutes you're about to get powerful real world retail strategies

from insights shared both from my guests and myself, backed up

by my 25 years in the retail industry. Keep listening to learn

how to grow a thriving, profitable product business. Let's

jump in with this latest episode.

One of the things I'm most passionate about is helping product

businesses improve their cash flow. And that is

because cash flow is make or break for

businesses. If you look at any statistics as to why businesses fail,

then you will see that the number one reason is always cash flow.

Because ultimately you get into a situation

where you just, if you can't pay your bills, you can't have a business. It's

as simple as that. And I do love the phrase turnover

is vanity, profit is sanity. But then there's a third element which is

cash is reality. So what we're going to be talking about

today is how to take back control of your

cash flow and also understand more about where your

money's going out and how to get more of it to stay into your account.

When I talk to people who are feeling stressed in their business, it's because

they've got a particular need, they've identified an issue and they're looking for a

solution. So whether I'm talking to them about my stock doctor service

or my retail by design one to one work, then

usually they've come to me because there's something going on in the business

what links them all together, whether or not they are actually

doing really, really well and super profitable and in

fast growth mode, or whether they've hit a plateau or, and everything

in between is they feel out of control and

they feel like they don't have visibility. One of the things that makes

cash flow so difficult for so many people is that it is really

multifaceted. There are sales coming in

and there may be sales coming in from four or five, six different sources.

There are bills going out and those bills cover everything

from bills you pay once a year to bills that you're paying

every month to bills that you're paying every week and also

then those kind of big outlays of cash. Especially if you're somebody who

manufactures. That's particularly difficult because Paying for a production

run up front is really, really tricky. And what happens is this.

All of this money effectively flying around is coming in, it's going out,

and it can feel just like a bit of a whirlwind,

even when it's doing well. Sometimes I see people who've got money in the

bank, but they're scared to spend it because they don't know if they can have

enough to cover everything else. And then there's people who are

at the bottom of their overdraft or juggling multiple loan

repayments. So there are a whole host of different

situations with cash flow. But in a way, regardless of whether your

cash flow is good or whether it's bad, not being able

to have it mapped out and really clear and in front of you is an

extremely stressful situation. I absolutely love nothing better

than helping people unpick what's going on with their cash flow and getting

it sorted out for them so they have a clear spreadsheet that

they have got it all mapped out and they can see it in front of

them. And what I wanted to do in today's episode is talk about

how you can improve your cash flow if it's something that

you're struggling with. And also the importance of having a plan,

effectively being able to see it. The other thing I would say as well

is that another reason I think this, people find this really difficult is

that cash flow and taxes and business

finances, the kind of things that your accountant might help you

with, they're often very different things. So what works

for you as a business owner and what works for your bank account and

what hmrc, the information HMRC want to see that different things.

And what we're talking about is really grounded in the reality of what it's

like day to day as a business owner, to go from

running your whole business on whether or not you think you can cover something based

on what's in your bank account, to actually feeling like you're in control and you

can see a year ahead of you what your bank balance is likely to

be on any given date.

So let's talk through the cash flow framework,

because I think the first step towards having a better cash flow

is understanding all of the different things that impact it and how they all

relate to one another. The acronym I like to use for this is

shops. Very appropriate for the retail industry.

And what SHOPS covers is the different

elements that impact your cash flow. And we're going to talk through them. So

just top line, the SHOPS stands for S for Sales,

H for Having it all mapped out. O for overheads, P for profit and

S for stock. So all of the different elements that go into impacting

your cash flow and all of the different things that you need to look at

if you're finding cash flow really difficult.

So let's start with the S, the first S. Sales. Now

this is interesting because I can tell you that most people, if you

ask them what they need to grow their cash flow, they're going to tell you

that they need more sales. And I'm here to tell you

that more sales are great. That is very helpful for

people, especially when they're very first starting out and they are making very, very

few sales. But you can also have a business with lots of

sales and a really difficult cash flow. So don't fall into

the trap of thinking that all you need to do to resolve your cash flow

issues is have more sales. So they are important.

As I said, if you're only making one sale a week and you've got

overheads, then clearly the only way to improve your cash flow is going to be

to grow your sales. But there's also lots of people who scale and they hit

six figures and they get beyond six figures and they're just more stressed and the

business is more unmanageable because they don't have it all mapped out.

So the key thing here to say is that yes, sales are important.

They aren't the only thing. There's lots of other things that you can do to

help make your cash flow feel more manageable without only relying on

more sales. The other thing I want to just highlight as well

is that you need to make sure that they are profitable sales. I talk a

lot about pricing, I talk a lot about profitability. You may have heard

me say this before, but ultimately

it's not about the top line sales, it's about how much profit

they're bringing into you. Because another issue that I've seen with people with cash

flow, for example, is they're plowing a lot of money into advertising.

And if you're not careful and you're not keeping a really close eye on your

roas, your return on ad spend, then you can get yourself into a situation

where you've got sales coming in, but ultimately your cash flow is really difficult

because there just really isn't much profit or your pricing isn't set up

correctly and therefore you need to review

that and improve your profit margins to grow your

sales more profitably. If you want any more information about that, then episode 259

is all about profit margins. Episode 260 is all about

pricing. So you can go back and check those out if you want more detail

on that subject. But just to say that yes, sales are important for your cash

flow, but don't fall into the trap of thinking, oh,

once my sales improve, my cash flow will be sorted. That's not true.

And it can lead you to put off really delving into your cash flow

for quite some time because you think it doesn't apply to you yet. And then

before you know it, the numbers have got bigger, the stress has got bigger and

you find yourself in a tricky step situation.

So that's where H, the H for shops having it all mapped out

comes in. So having it all mapped out is

about being able to actually see what's going on with your

cash flow. So this is a cash flow forecast.

Now if you go To Resilient retail club.com

cashflow, you can download my form free Cash flow

forecast template which will help you with this enormously.

So if you have ever struggled to find cash flow

planner that works for you because it's not set up for product businesses, then

go check this one out. I've been so frustrated over the years

with trying to find a good tool to recommend to clients

to help them with their cash flow that I basically ended up

creating my own. The biggest issue I have is a lot of the software out

there. For example, for cash flow for small businesses businesses, it's really

set up for service businesses. So it talks a lot about things like

how many proposals do you have out right now, how many potential clients,

what's your potential future income? Whereas actually for product

businesses, that's completely irrelevant. You need to be able to capture

all of the different elements that you've got going on. What your sales forecast

is by channel. You need to be looking at things like your

bills, your stock purchasing, your salaries, so on and so

forth. So having it all mapped out is an absolute game

changer. And in my Retail by Design one to one program, I work

with a lot of people on this one to one. So I walk through it

together and I get them up and running and using it on a weekly basis.

And I can't tell you the number of people who tell me I really hated

spreadsheets, but I love this one. And the reason that it's so

transformative is that it shows you the

timing of everything. It's a week by week spreadsheet that you update once a week

and it allows you the power to understand the how

much money you're going to have in your account at any one time

the power that that gives you. It means that if you have to make a

big purchase, you can see the timing of it. You could also

negotiate from a much stronger position with people that you maybe

owe money to. So, for example, let's say you've got an invoice that's outstanding.

Rather than thinking, oh my goodness, how am I going to do this? Potentially, you

could have a conversation with them which would say,

I've done my cash flow planner. If I could split this into two or three

installments, that would really help me. Is there any way that we could do this?

And of course, they may just say no, but it's a much stronger

position, a much more credible position to come from when you've got it all

mapped out and you can have those kind of conversations with people then instead

just feeling like you have to, maybe you can't

make the payment that they're expecting and that that creates all kinds of other

difficulties. It's also about it being really visible. And

I've worked with people where we've done this cash flow planner and it's been really

difficult to see. And I've worked with people where it's given

them a lot of confidence because they've been able to see

how much they've actually got. But even for the people where it was really tricky

and really difficult, it really highlighted where the issues were in their

business and it helped them map them out. So I'm excited to share it with

you. As I said, go to resilientretailclub.com cashflow and you will

be able to download your free planner with an explainer video.

This is a game changer if you can get it all mapped out. It's the

difference between feeling like you're doing okay and knowing that you've

got what you need. And I really highly

recommend it. It doesn't have to take forever to set up, but it can be

really, really powerful. And as I said, I actually don't

know how people make decisions in their business without being able to see the

cash flow. Because also once you've got it all set up, you are able

to really create something that if you

want to bring in a new person or you want to spend money on something,

you put that payment in the time at which it's going to come out

and then you are able to decide, is this something that I want to

do? So you can actually make those decisions before you do them in your business.

Okay, so now let's move on to the O the overhead.

So this is about understanding, understanding your regular fixed costs like your

rent, your staffing, your software.

And this is a really good exercise to just

double check. So if you are struggling with your cash flow, I would

say most of the time when people are struggling with their cash flow, it's usually

to do with the profitability or to do with the amount of stock that they're

buying. But sometimes it's because their overheads are really heavy, are really

onerous. But it's really good to know that and it's very good to double

check all of your overheads. And the key thing to remember about your

overheads is the amount of money that you have to generate through sales to

cover any expense in your business is quite considerably more than that expense.

So if you have something that costs you £100amonth, then the sales that

you have to generate, depending on your profit margins, is probably more like

£250. So anything that you can do in terms

of your overheads or your fixed costs and bringing those down will help

your cash flow enormously. So it's well worth doing a bit of

housekeeping to make sure you're keeping on top of that.

And then the P is for profit. And again, if you want

to know more about profit margins, then check out episode

259. Margin absolutely matters, and it's

where many businesses fall down. And ultimately, if you haven't

got good enough profit margins, what you'll see is that you really feel

like you're on a treadmill. So as you're generating sales, the money that's coming

in from those is coming in slower than the money is going out

to cover the cost of those goods or those supplies. So again,

if you feel like your cash flow is really tight, then checking

your profit margins is absolutely crucial because anything that you

can do on your profit margins will have a really big impact

on the overall profitability of the business. And one of the ways that

I really like to illustrate this is by doing a break even analysis.

If you've read my book Tame youe Tiger, which you can get from all good

bookshops, then you may be familiar with this exercise.

Or if you're in the resilient retail club, we also have a course that goes

through this. But the break even analysis is about saying this is what your

average sales are, these are what your overheads are, and this is what

your profit margin is, your out margin. And what's really amazing

about this exercise is when you do it like this. You can see

that a few percentage points shift in your out margin can make

the difference between a business that's profitable month on month and a business

that is running at a loss. So your profit margin is

absolutely crucial. And I would say again, if you're somebody who's struggling

with cash flow, feel like you're never getting on top of things, then

going back and checking your profit margins is a really great place to start.

The final S for stock. Stock is

what I would say is the silent killer of your cash flow.

And it's a really difficult thing for a lot of people to get a

handle on because this is something

that an accountant, for example, would see that your stock is an

asset. So it's entirely possible for you to be showing as having

a profit in your product business and have absolutely no money

in your bank. And for me, cash flow and stock

really go hand in hand. The more stock that you have,

then the more likely you are to be struggling with your cash flow.

Because cash really should flow. It should go out

with you spending money to buy your stock, and then it should come into

you quickly from selling that stock. And the longer it

stays out of your bank account in your stock, the

less you actually get a flow of cash, the more that it slows

to a trickle. So if you are feeling stuck with

your cash flow, if you're feeling like you really

should have more money in your bank than you actually do,

then getting a handle on your stock is an absolutely critical

part of that. I would say after low profitability, stock is

one of the major culprits when it comes to people's cash flow. And they're just

basically spending too much money on their stock, which means that

they don't have enough money in the business to do everything else that they need

to do. You want to make sure that you are

not stockpiling. In other words, your stock number is going up and

up and up. You want to be making sure that you're keeping a really good

handle on that. And if you look back through the catalog of the

podcast, I've got lots of episodes all about stock management. And

again, my book Tame youe Tiger has a lot of information, information about stock.

And if you know that stock is a problem in your business and you just

don't have the time to fix it, go check out our Done for you stock

management service Stock Doctor, which you can find at

resilientretailclub.com stockdoctor where we will put

a trained professional into your business who will help you manage your stock.

We've seen some incredible impact from this service. For

example, we've seen on average over six months

customers seeing a 10% growth in sales on 10% less

stock, which is adding a real chunk to their cash

flow to their bottom line and really helping this whole cash flow conundrum

feel much better. So stock is like trapped

cash. If your business is feeling stuck, if it's feeling like there isn't enough

cash flowing through it, then your stock could well be a

culprit.

So there you have it. Shops, sales, having it all mapped out, overheads,

profit and stock. And if you want to have it all mapped out, head over

to resilientretailclub.com cashflow and get your hands on

our free cash flow planner with an explainer video.

So what's next? Well, I would say if you just want a quick

2 minutes on how to improve your cash flow, start with a margin check,

pick your five best sellers and calculate your in margin again.

If you want to know more, go listen to episode 259 where we talk

more depth about margins and how to calculate them and then take

a look at your stock levels. How much stock are you sitting on? If you

look at your average weekly sales over the last 12 weeks, how many

weeks worth of stock do you have in your business as well worth

calculating and it can be quite eye opening. So use this shop's

framework to do a mini self audit and as I said, head over to

resilientretailclub.com/cashflow to get yourself a free cash

flow planner. So shops helps us focus what actually moves the needle in

your business and make sure that you grab your free

template. And why not head over to Instagram as well. Say hi at Resilient Retail

Club. Let me know what you thought about today's episode and ask me any questions

you've got about your cash flow. See you next week.