Short on Cash? Triage Negative Cash Flow

Retailers sometimes have difficulties managing cash. It could be for any number of reasons—another store could have opened too nearby, the owner could have health issues, or the owner could have made some bad decisions. The reason matters less than the fact of the emergency: bills are due, and there’s no money.

In some respects, emergency cash management is like managing a brand-new store. You need to lift sales at minimal cost.

First Priority: Check For Theft

If this is a change in cash flow and you can’t immediately pinpoint a reason, look for all the theft hallmarks.

Do not assume that your friend of 20 years is not stealing from you. It happens. Check everything. Here are some ways to find clues.

  • Check the cash percentage on each shift. Normal retail sees about 90% electronic payment. The exact figure varies by a small amount from shift to shift, but if one person suddenly starts collecting cash on only 1-2% of sales, that person isn’t ringing up those cash sales and is pocketing that cash.
  • Likewise, watch order cancellations—an order is rung up but not completed. It’s part of the above process.
  • Anyone can get a Square account on their phone and divert your electronic payments, too. To identify that, monitor your cameras.
  • Watch store credit. An employee might be giving a dummy customer store credit, then using the store credit to pay for an item. Your inventory count is correct, and your till is right, but the money went into the employee’s pocket.
  • Watch purchases. Employees might make a purchase for $10 and record it as $20, pocketing $10 for themselves. I know of a trusted employee of many years who stole about $80,000 this way.
  • Spot-count high-theft merchandise like Magic boosters and Warhammer 40k boxes daily. Count areas more frequently if you find discrepancies until you can narrow it down to someone’s shift.
  • Go through your shift-change procedure randomly during the day when you are not on the register. Sometimes employees steal cash with the intention of concealing it later. If you catch them with a shortage midshift, you know where the problem lies.

While you’re checking for unlicensed withdrawals from the till, check your bank account for deposits. One time early at FLGS, I discovered no money in the bank, and it turned out my electronic processing had a glitch. A broken receipt printer kept my processor from sending deposits.

Scrutinize all your theft opportunities and procedures.

Prioritize your Debt

The slow accumulation of multiple purchases on time or loans is one of the major contributors to cash-flow difficulties.

  • Pay down higher-interest rates first.
  • If you can, consolidate multiple debts earn a lower overall interest rate.
  • Negotiate longer terms with distributors.
  • Avoid new debt.
  • Avoid receivables factoring (like Square loans).
  • Pay on time to avoid late fees and start restoring your credit score.
  • Review your credit score for invalid reports.

Work More Hours

Maybe it’s because I’ve never operated a company at a giant scale but I don’t understand corporate layoffs to “save cash.” Every one of my employees should generate more profit than the cost of their wages. You, too, should apply that principle to your staffing. If your employee positions aren’t making you money, restructure their job until they are.

The point of this brief aside is this: don’t cut the employees’ hours as a first move to save cash. It engenders ill will that can cost more than you save.

Do look for wasted hours. If you have 2 crew on for a 6-hour shift that normally sees $200 in sales, that’s wasteful. Reschedule one of those employees to another shift that needs it.

A friend, Marcus King, used to say “If what you’re doing isn’t working out, work another 10 hours a week. Repeat until it does work.” You can work more hours to improve performance but retain your staff.

Spend your time on promotion. Get on social media and engage with customers. Create new events in the store. Schedule a painting workshop, for example, and paint miniatures with some people. Even if you aren’t great at painting, you almost certainly know more than people who have never done it before. Have a terrain-making day in the store; the process usually relies on castoff materials and already-open supplies, so it’s a low-cost way to create customer appreciation. Other events with little cost in materials:

  • Run a deck-building clinic for Magic players.
  • Schedule a character-building session for D&D players.
  • Paint some miniatures.

If you absolutely need to cut employee labor, talk to your crew before making decisions. Sometimes a college student wants more hours to study for a couple of weeks. A retiree might be willing to give up a shift.

Sell Online

If you’re not moving clearance online already, identify some dead or surplus stock in the store and move it to a quick online channel like Facebook marketplace or eBay. You might have some success with Craigslist; I personally did not (but advertising sales on Craigslist might be a way to increase visibility, even if you don’t make the sales you list).

Continue to Advertise

Advertising often feels like a discretionary expense that you can stop when you need with no repercussions. Advertising gets you customers. If you want sales tomorrow, you have to pay for advertising today.

Cut back to only your most cost-effective ads—if you know what they are. Lean more heavily on free promotion, like social media. Concentrate on the basics of creating and supporting your community. If you maintain a 6% advertising budget normally, drop it to 4% temporarily.

Cut Costs

If you increase sales by a dollar, you might earn a nickel or a dime in cash after expenses. If you cut costs by a dollar, you increase your bank account by a dollar.

Recurring expenses are a part of life these days, and merchants expect that some percentage of their customers will forget about the expense after they stop using the service. Scrutinize your bank records for these disruptive costs. If you’ve stopped using Meetup, for example, and you’re paying their fee to moderate a couple of groups, something needs to change. Either actively manage the groups again or stop paying the expense.

Look especially hard at any personal indulgences. I’ve heard many allegations of retailers opening a store to obtain games at cost (although investing $100,000 now to save $20 here and there seems unwise). Holding off on a new Warhammer 40,000 army to keep the lights on is worthwhile.

Cannibalize Merchandise

Typically when you place merchandise orders, you do so in this priority: place customer request orders first, new releases second, then spend your remaining budget on restocks.

You can’t cut special orders. Those are guaranteed sales (or at least highly likely sales). You can trim new release orders to the highest certainty of sales. If you have pre-orders for 30 booster boxes of Magic but think you’re likely to sell 45 booster boxes of Magic, order closer to 30 than 45. In other words, order to sell out. Don’t order any quantity “just in case.”  Remember that this is emergency cash-flow management advice, not ordinary procedure advice.

The most flexible of these three areas (special orders, new releases, and restocks) is the last: restocks. Reducing restock expenditure means that your stock level decreases over time, but it saves cash now. It’s detrimental to long-term success, but if you’re not open next year because you’re running out of money today, then your long-term prospects are irrelevant. If you sell a high-dollar board game with no expansion, you probably don’t need it tomorrow. You can defer that restock until your emergency is under control.

Focus on low-price, high-turn items. When restocking, check your POS records for items with the highest turn rate. Booster packs are a necessity here. At FLGS I had a display of “Board Games Under $30.” Displays like that are good candidates for keeping in stock. Instead of carrying every single color of card sleeves, stock the 5-10 most popular colors that make up 80% of your sleeve sales.

Encourage pre-orders for upcoming titles without offering discounts. Remind customers that, in the event of allocations, customers who pre-order receive their goods in the order in which they placed them. Ordering late or not at all means you might not get it. Fear of missing out will generate pre-orders. Games Workshop is a fantastic product line for this—despite having 40 years of sales histories, they regularly and inexplicably under-produce items guaranteed to be extremely popular.

Restock frequently. Announce these restock arrivals on social media. Normally I advocate for discretion because this sort of announcement, although popular if used infrequently, wears out its welcome, so to speak. Mix your social media messages. In a temporary emergency situation, post them all. Tag people who might be interested.

Reach Out for Help

“Reaching out” suggests different things to different people. I have seen game stores appeal to their customers with a candid statement saying that they’ve had difficulties and they would appreciate a token purchase to help. I’m not a fan of this method, but stores have had success with it in the past.

In this case, I am suggesting communicating your problems to other retailers through a networking group like the Facebook page Opening a Tabletop Game Store or the Discord channel Game Employees Retreat. Ask what’s worked for them. I am distilling the best advice here, but the back-and-forth of a new conversation in which you actively engage can tailor a better answer for your unique situation.

It can also mean reaching out to a professional. I know that paying professional fees when you are strapped for cash can be impossible, but I have deferred payment plans for stores in exactly this situation. Click over on the troubleshooting page and we can discuss your situation.