Updated: Sep 11, 2019
Yesterday, my daughter told me that she has not been sleeping well: insomnia she claims.
Poor thing, I felt bad. I joke a lot, but college is hard! She’s almost 22 now and graduating this school year. In addition to worrying about her schoolwork, she worries about finding a job, supporting herself and moving out from the comfortable campus life. It’s a LOT! No wonder she’s got insomnia.
Except she doesn’t!
It turns out that once she gets into bed she’s sleeping quite well! Her specific problem is not an inability to fall asleep; just a failure to get to bed at a normal hour! Turns out it‘s impossible to get eight-hours of sleep if you’re only in bed for three hours!
As an independent retailer, I often lose sleep too! But I do it the old-fashioned way: I get into bed and toss and turn all night!
When you own your own business it can be any of a number of topics that keep you up at night but for me, it’s usually the checkbook!
My business has been around a long time; 112 years and so it’s reasonably well funded. But still, the stress of keeping it well funded every month has cost me plenty of sleep over the course of my career.
Nothing keeps an independent retailer up like a small checkbook balance!
As an independent retailer, your finances can change quickly. I’m well funded today…. but if I’m not careful tomorrow may be a different story.
One of the ways my money can disappear is in my accounts receivable ledger.
I’m not in my stores everyday and so I don’t always know which customers are busy and how much they are buying. That’s a risky proposition since unless they’re paying COD, that’s MY money they’re walking out the door with!
I don’t have the time to look at every customer’s balance everyday but still want to avoid getting caught napping. I know roughly what my total outstanding accounts receivable balance is at all times and check that total fairly regularly; even when I’m not in the stores (or ESPECIALLY when I’m not in the stores). If I see a spike up in the total, I dig into the details and see who may be spiking up and take some action before things get out of hand. I’m not necessarily trying to avoid all problems because that would be impossible…there’s risk in giving credit! I am just trying to keep my problems small. It’s not a perfect system and I still get the odd surprise, but I generally catch them early enough that they’re not the kind of surprises that keep me up at night.
That’s not rocket science but you would be surprised how many dealers I speak to that DON’T track their A/R closely! Here’s the thing about your accounts receivable though: you have to have a dollar for each dollar you put out there if you want to continue to be able to pay your bills on time.
Accounts receivable issues can take months to clear up so it’s crucial not to let things get out of hand. Even once you try and rein it in, you may have to wait 90 days or more to feel those benefits. And often you don’t get anything while you’re waiting.
Recently, our paint remover of choice for the last 50 years or so became illegal to sell. Rock-Miracle, made from methylene chloride, will have to be off our shelves by November 1 of this year my suppliers tell me.
Not wanting to get stuck with a toxic waste that I could not dispose of nor sell….I called a customer who I knew could use it all before the deadline and offered him all I had (about 35 gallons) at a significantly reduced price. Just to make sure I didn’t have any come November 1. Then, I went into my point of sale system and made sure that this item would not come up on any orders in the future. Problem solved!
And then there was Junior!
Junior is a great kid, terrific employee and friend (and fellow cigar lover). He’s also the Tremont Paint “Dunce of the Month!” He saw the empty spot where the Rock Miracle used to be and took it upon himself to load up! Thirty-two fresh gallons came in the next day. Nothing like tossing $1K out the window! I should have sent Junior out the window with my money!
So inventory is another place I need to be careful if I want to continue to be able to both pay my bills and sleep at night! This time of year I really need to be on my toes because we are busy and so I’m inclined to order more. BUT….if we don’t sell it all in time, I can easily be stuck with it over the winter. Talk about not sleeping!
So as the busy season winds down, start thinking about lowering your outstanding accounts receivable and inventory.
Or just give my daughter a call any morning at 4 AM! It may not be for the same reason as you, but she’ll be up!