Retail Cash Flow at Christmas: Four Ways to Ease the Squeeze

I think it's a really important episode to have at this point in the year, because a lot of retailers that I talk to feel very stressed out by what I call the Christmas cashflow pinch.

What happens is you have got plans for Christmas, you place your orders, and then September, October comes along, you have to pay for a lot of these products.

Even if you've used Fair's 60-day payment terms, you may still end up with bills coming out now, which is really all about your stock that you're purchasing for Christmas, but you haven't had your Christmas sales yet.

And the thing is that a lot of people feel very bad about this.

They feel like they've messed up, they made some big mistake, that maybe they don't know what they're doing.

And I wanted to talk about it today because I want you to know that you are not alone.

This is something that happens to pretty much all retailers, and that includes the really big guys as well.

When I worked in big corporate retail, we would have these meetings, which was called the four Ps, pushing payments past peak, which was basically where the finance team made us go through every single supplier and try and see what we could do to move our invoices a couple of days or a week.

We'll split things down even further, extend payment terms, whatever that we could do.

Because whatever bit that we could eke forward, then we would be able to improve the cashflow of the business and basically make it a little bit easier for the finance team.

And we're not talking about they were worried we were gonna run out of money.

We're talking about they were worried they were gonna hit the bottom of their overdraft limit.

So it wasn't a question of not having any money in the bank, it was that they had hit the bottom of the overdraft limit that they had been given.

So what we're seeing is then that retailers often have this issue.

They get to the point, this point in the year, it's just the way it goes for a lot of retailers.

For example, when I worked at Paperchase, we would be getting half of our revenue for the year in the fourth quarter, if not more.

And this happens to a lot of businesses which are very heavily gift-focused.

So when you've got that situation, you have got a huge up and down in terms of your sales coming in and the expenditure going out.

So a lot of people describe it as feeling like you're going up the slope of a rollercoaster.

You know that you're going up and up and up and up, and you've got that sense of anticipation building.

You just don't know how it's gonna feel when you go down the drop.

Is it gonna be super exciting or terrifying, or maybe a bit of both? So if that's you, if you're feeling like that, if you're thinking, "I really messed this up.

I should've done it differently," I just want you to know that this is effectively a part of the way that the retail industry works.

It's part of the way that the seasonality works, and it's part of the pressure of having a very seasonal business.

So every year, retail businesses have to live in the gap between buying the stock and selling the stock, and the longer that gap, the more cash it is that you need.