If you’re running a retail business, it’s important to keep a close eye on your finances to ensure you’re maximizing profits and reducing expenses. Having a good grip on your finances will help your store run smoother, help you identify your biggest expenses, and encourage you to create a plan to mitigate your costs. Here’s how to figure out your retail business’s finances for greater financial freedom.
1. Be Honest With Yourself
The first step to figuring out your business’s finances is to be honest with yourself. Don’t make excuses for why your expenses are through the roof, or why you spend some of the profits to go on vacation rather than fix the store’s broken front doors. If you’re just not that great with money, that’s ok. The first step to solving any problem is realizing there is one to begin with.
Usually, problems are not as serious as our minds make them out to be. If you have a problem getting your business’s finances in order, it might be time to ask for help. There are plenty of financial resources available for businesses and individuals alike, so the help you need is usually only a phone call or click away.
Now that you’ve been honest with yourself, it’s time for some self-reflection. What can you do to avoid these problems in the future? What kind of behavior do you need to change?
2. Write it Out
Writing out a detailed list of your company’s finances can help you create a more visual representation of where you’re at financially. Sometimes, seeing the issue in a visual medium can help it make more sense, and you’ll be able to have a clearer vision of what the actual problem(s) might be.
You can also generate graphs and charts if you’re not interested in writing things out. Many POS systems will actually allow you to generate charts from the month’s financial reports; a handy tool that is a standard feature with a lot of modern POS systems.
POS systems will organize your reports by date, time period, or whatever filter you prefer. This way, you can generate reports that go as far back as the previous year, to compare YTD financial information and see whether or not your business has grown.
3. Analyze Cost and Profit
While you’re writing out your finances, you want to take an in-depth look at your costs and profits. What is your gross (pre-expenses) profit margin and your net (post-expenses) profit margin? Are you completely broke once the expenses are accounted for each month?
From here, you can identify those expenses that are causing the greatest financial strain on your organization and make adjustments accordingly. In retail, you’ll likely find that labor is one of your biggest expenses. Are you staffing according to the demand of the store? Maybe you’re staffing too many employees during slow days or not enough during the busiest times of the month.
4. Create a Monthly Budget
Once you’ve identified your expenses, it’s time to create a budget to help keep them in check. You’ll want to put strict limits on spending, especially for things that don’t offer an ROI (return on investment). Focus your profits into things like marketing and store improvement or brand recognition, or even introducing/improving customer loyalty programs.
A monthly budget can be a business’s best friend; keeping expenses in check and helping to grant you better insight into the daily cost of running your business.
5. Identify Marketing Issues
Part of getting your finances under control is figuring out if your marketing efforts are actually working or not. A marketing campaign that doesn’t bring in any customers is just a waste of money; and if you aren’t focusing your marketing efforts, this is pretty much what you’ll get for your effort.
Focused marketing is geared towards specific demographics of your customers. Tracking customer purchases allows you to better understand what kinds of products they buy, so you can customize your promotional materials to reflect these tastes and encourage a call to action. Focused marketing is infinitely more effective than blanket marketing, where you throw promotional materials at anyone and everyone.
6. Hire an Expert
If you’re unfamiliar with how business finances operate, or simply need some help getting a budget together, you might want to consider hiring an expert such as a financial advisor. With expert advice, you’ll be able to navigate the financial landscape a little easier; reducing some of the stress associated with managing your store’s money.
Hiring a financial advisor in your area is easy with a simple Google search. If you’re in the San Francisco area, you can compare the 5 best financial advisors in San Francisco on the Careful Cents site.
7. Use the Right Tools and Software
Having the right tools at your disposal can make the financial management aspect of running your business easier and less stressful. Many POS systems can integrate with your bookkeeping software; eliminating the need for manual data entry (and therefore fewer hours you need to allocate to a bookkeeper).
Always be sure the software you’re purchasing has the features you need at a price you can afford. Spending a fortune on software to help you get your finances under control is hardly productive. There are plenty of free options available as well, for those on a strict budget or without much extra spending money available.
