Identify Expenses-Even the Little Things!
You’d be amazed at how much seemingly small expenses can add up through the month. A month is four weeks of expenses piling onto your budget, and even the smallest things can tip the scales and put you over budget. Things like that leaky faucet in the bathroom, or the one window that lets all the heat or A/C out of your store.
To start a budget, you first have to document every expense for your business. This includes the skyrocketing water bill from the leaky faucet. Everything must be accounted for in order to get an accurate number for your expenses. Once you’ve identified everything, you’ll want to add it up and get a number. You can break down expenses into categories as well for better organization.
Be sure to include your labor costs in your expenses. This is likely the largest cost associated with your business, but it’s also the most flexible. In creating your budget, you might find that you’re scheduling too many people during slow times of the day or during your off-season, which brings us to our next point: “trimming the fat”.
Change Providers or “Trim the Fat”
You’ve identified all of your expenses; now what? You’ll want to take an in-depth look into what providers you have for certain services and where you can “trim the fat” so to speak. All this means is getting rid of or reducing your expenses as much as possible; whether it be labor costs, utilities, or store maintenance.
If it seems like you’re paying a lot for electricity, shop around for a new provider. There are also alternative energy options like wind and solar power that may be available in your area, and could possibly be less expensive than your current electricity generator.
Take a look at your labor costs as well. What time of the day or year is your store the busiest? Are you staffing too many people during this time? Are you staffing too many temporary workers during the holiday season? Labor is your largest expense, so if you can better manage employees, or even downsize your team, it will help alleviate some of your expenses.
Get a POS System
Modern POS systems are much more than simple cash registers. These sleek, often portable machines come with powerful software tools to help you better manage your store. What does a POS system do?
A POS system will act as a point of sale cash register to help you accept payments, but it’s also an inventory tracker, a marketing tool, and much more. Almost all POS systems come standard with some form of inventory management software built-in, so you’ll get real-time updates on your inventory as it changes, and won’t have to perform nearly as many manual inventory counts (who likes those, anyway?).
With a POS system, you’ll find that your finances and inventory feel more organized, and you can even send out promotional materials or create customer profiles in your POS software. This makes a POS system one of the best investments you can make for your retail stores.
Downsize Your Inventory
If you’ve got dead inventory sitting on the shelves, it’s costing your store money. Managing your inventory is perhaps the most important aspect of budgeting for your retail store, as inventory is what drives profits and brings in repeat customers. Dead inventory isn’t doing anyone any good; host a sale or liquidation to recover a small portion of the dead inventory’s cost and get it off of the shelves!
You probably won’t get the full amount back for such items, but if you can manage to sell off most or all of them, you’ll at least have recovered a small portion of your investment, which is better than nothing. Next time, use your POS system to better plan how much inventory you stock, and be sure to pay close attention to the purchasing habits of customers so you’re stocking the right items.
Set Monthly Limits
Once you’ve identified expenses, “trimmed the fat”, and managed your inventory, it’s time to set limits. Make a hard limit for things like utility bills and labor, and stick to it. This may mean strict policies on attendance for employees or even cutting hours when you reach your labor ceiling. Having hard spending limits will help keep you within budget and always aware of just how much money you’re spending each month.
Sometimes, managing finances alone simply isn’t possible. If you need help deciding on a budget or simply getting your store’s finances together, you can hire a financial advisor to give you expert advice on the subject.
Keep Track of Your Spending The final step to creating a retail budget is to keep track of your spending. Be sure to track everything you spend money on, and account for it all at the end of the month to compare to your budget. Are you over budget? Under? Right on? From there, you can make any adjustments necessary to keep your store on track to running as cost-effectively as possible.