Cash flow for a small shop: how never to run out of money
A business can make money on paper and still lack the cash to pay its supplier. Cash flow is the money actually available today.
Profit and cash flow are different
Profit is calculated on sales; cash flow, on the money that really comes in and goes out. A credit sale raises profit but not the till. A big purchase of goods lowers the till without changing the day’s profit.
The three things that lock up cash
- Credit given to customers, until it is repaid.
- Excess stock sitting on the shelves.
- Purchases paid to the supplier in advance.
Plan for fixed costs
List what you pay every month whatever happens: rent, electricity, salaries, transport, phone. Know how much you must sell per day to cover them: that is your survival threshold.
Build a safety reserve
Set aside a small amount each week, however modest, to absorb a weak month, a breakdown or a price rise. Ideally aim for one month of fixed costs.
Track money with Kaislo
Kaislo separates total sold from money actually received, tracks the credit owed by each customer, stock value and expenses. The dashboard and the Excel report give the balance for the day, week and month.
Sales, stock, customer credit and evening accounts in one place, on phone or computer. 30-day free trial.
Cash flow for a small shop: how never to run out of money
Why am I short of money when I sell well?
Often because of unpaid credit, too much stock or purchases paid before they are sold.
How much should I keep in reserve?
Ideally one month of fixed costs; start small and regularly.