Cash Flow Forecasting will help you beating the competition in Atlanta
Cash is the blood if you want to keep selling hair in Atlanta. You can only survive the saturated hair market of the capital of Georgia if you keep control of the cash flow. If you master the art of Cash Flow Forecasting, you will outpace the competition. And get their clients as a reward!
So, time for a dull but business lifesaving post about financials. I will make it as less as dull as possible, because I want you to keep on selling hair in Atlanta!
Sorry my Queen, but Cash is King
Even if you name your business “Queen Virgin Remy”; cash is King. Cash is the most important financial driver to keep your business selling hair in Atlanta. A cash flow forecast will help you to pay the bills in time.
First, we need to agree on what Cash means. Cash is not the profit you make selling hair.
Cash is the money in:
- your pocket,
- on the bank account or
- saving account
you can use to pay bills or to use for household expenditures.
Profit is when you sell hair above the cost price of the hair and after you deduct all expenses. Expenses like:
- the rent of your store on Edgewood Ave, Atlanta,
- the shipping expenses
- the invoice of the accountant and
off course the depreciation of the inventory.
You can make a lot of profit by selling hair, but if your clients pay later or you invest all the money you receive in new inventory to show in your store, you have no cash. You will have no money to pay bills. You might need a loan. So, profit is nice, but cash is better.
The art of Cash Flow Forecasting for a hair store
If you do not have a crystal ball, you need to make some assumptions about what the future will bring. You will notice over time your assumptions will improve. The forecast you make about what the cash will come in and what will leave for your hair business will be more accurate.
Please understand it is all about learning, nobody will ever know exactly how much money she will receive in 25 days’ time. But more important is you start with thinking about the cash you need in the future.
When I was still at the university, there was a boy whose father died, and he left him a business. Of course, very sad news, but rather soon the boy had a fantastic cabriolet. Everybody was jealous. But as he used the cash flow of the business to pay for the car, it was a matter of a couple of months before he ran out of cash. Now he had to walk again to the campus instead of driving.
Take your time to learn how to enhance your forecasting skills and do not give up when you miss the forecast and receive less or spend more money. The only thing you shouldn’t do is to give up forecasting your cash flow.
Tricks to forecast
Let’s start with the reason you started this hair business in Atlanta. You want to sell hair. Based upon the market survey, your ideal client profile and your talks with potential clients at Cumberland Mall you have an idea what people want and approx. when they will buy the hair.
If you sell hair on credit of work with a layaway plan, you must minus the money when you sell on credit form your cash flow. The money you receive because of the layaway plan you can add.
But you can only sell hair when you buy hair first. So, you need to consider the time it will take you between the purchase of hair, assuming you must pay right away, and the average days it takes before you sell hair. The days the hair is on the selves, you do not have cash to pay bills. But you have beautiful hair to attract customers.
Now it also pays of if you have a good wholesale supplier, or more accurate, a good relationship with your hair supplier. If you manage to get some credit on the hair you buy you can free up cash. See if you can agree on the payment of half of the stock when you order and the other half a couple of weeks after you received the hair.
You can even accept a higher price for the hair, if you can sell more hair in the time you have the hair on credit.
Again, this all depends on the relation with your hair supplier, thus take this in consideration when you select the hair supplier.
Hair Cash Flow Forecasting Model
For hair businesses I developed a spreadsheet with a sales forecast and a cash flow forecasting model. These models, together with you learning to understand the cash flow of the business better over time will help you to keep on selling hair in Atlanta.
