Tax & Accounting News

Retailers the Latest Victims

15/01/2009

With big name businesses like Woolworths and Adams among the latest victims of the ongoing credit crunch, every retailer will be very conscious of just how vulnerable they are, regardless of their particular market.

The key reason why retailers – like any other business – go bust is that they run out of money and at a time when consumers are reining in spending, many retailers are likely to feel the pinch sooner rather than later.

However, following the following steps can provide a simple formula for survival:

• put the right quantity of goods on sale at the right time, at a price that makes a profit when costs and overheads are taken into account
• be rigorous in cash collection and monitoring the cost of sales and overheads.

Sticking to this formula allows early identification of potential problems and early action to resolve them.

Useful steps to take as part of this process include producing monthly financial forecasts, with cash flow the most important, and shifting old stock as soon as possible, to free up working capital.

It’s also a good idea to look at how your competitors are performing and adjust your business model if what they’re doing is delivering better results than your own.

If problems do arise, take action quickly. Time and time again, businesses go under because they leave it too late, so if you’re heading for trouble, talk to your professional advisers and your creditors to come up with a solution that allows you to keep trading.

For further information or advice, please contact us.

 

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