Plus: The phantom inventory problem | SBA pandemic loan defaults are rising
Cash is king—and right now, small businesses are losing it from the inside out. This week, we dig into the cash flow traps that are harder to see than rising costs but just as dangerous. We also dig into phantom inventory, what causes it, and how to avoid it.
But first—a startup gave an AI bot $100,000 and told it to open an actual retail store. It went...like you probably thought it would.
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Five cash-flow traps hurting SMBs and how to fix them
While gas prices and recession are very present threats to small businesses, the real danger is in your own books. If you don’t pay close attention to your day-to-day cash flow, you’re risking bankruptcy.
Small business finance expert and CEO of the fintech provider Tight, Raj Bhaskar, outlines five cash-flow traps that can cripple SMBs and what you can do to stop them. First off, revenue is not the same as cash, and you can tighten that gap between customer payment terms and supplier obligations. Don’t rely too heavily on credit that can disappear unexpectedly. Instead, build cash reserves while you have the credit. Take a close look at your recurring costs and if they’re up and your prices aren’t, make adjustments now. Chase unpaid invoices, period. Finally, create a 13-week cash-flow forecast with a simple spreadsheet and update it weekly.
Why this matters: Most small retailers find out they have a cash flow problem when it's already too late to fix it. Tracking where your money actually is—not just what your revenue looks like—is the difference between catching a problem in week two and discovering it in week 10 when options have run out. (CPA Practice Advisor)
➕Check out our Q&A with the founder of a bookkeeping firm specializing in small businesses
Retail’s phantom inventory problem and how to gain visibility ASAP
Nothing kills the customer experience faster than searching for an “available” item in-store or online and not being able to get it. The culprit? Phantom inventory—the discrepancy between inventory data and actual stock.
Katie Riddle, global hospitality strategy lead for Verizon, notes that phantom inventory can occur when associates restock without immediate system updates, customers leave items in the wrong locations or products get buried in messy piles during busy shopping periods. Inventory management software with real-time visibility is a key component of 3PLs used for e-commerce fulfillment.
But for small physical retailers, handheld employee scanners may not be the norm. However, you can analyze which products get moved most frequently, when misplacement typically occurs and which areas in your store see the most disruption. Then you can proactively adjust staffing levels, modify layouts or ramp up monitoring in certain areas before issues impact sales.
Why this matters: Phantom inventory doesn't just lose you a sale, it erodes the trust that brings customers back. Whether you adopt high-tech solutions like computer-vision technology or recount the inventory on your shelves an extra time, reconciling what you have and your inventory data is critical. Otherwise, brand perception and loyalty deteriorate over time. (Retail Customer Experience)
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Pete Nordstrom on the value of making mistakes and having experiences
It’s a multi-billion-dollar department store empire today, but Nordstrom started 125 years ago as a small shoe store in Seattle, founded by a Swedish immigrant. Throughout that time, it developed a reputation for personalized customer service. Pete Nordstrom, co-president with his brother Erik, sat down with Business of Fashion Podcast to talk about why its physical and digital stores share a single inventory, why curation matters and why tangible experiences and learning from mistakes never go out of style.
“You're valuable to a company because you've done things, and things that have worked and things that haven't worked." –Pete Nordstrom
Why this matters: Nordstrom built a multi-billion dollar business on personalized service and learning from failure—principles that are just as relevant at one location as at a hundred. The lesson for independent retailers isn't scale, it's conviction: knowing what you stand for and not letting outside pressure pull you away from it. (Business of Fashion Podcast)
How these small businesses are adopting–or rejecting–AI
Three Gainesville, Fla. businesses shared details and insight about how they’re using AI in their businesses, and their stories may surprise some AI skeptics while validating others. For a small seafood purveyor, there’s little AI can replace since it can’t smell how fresh fish is, and counting a modest amount of inventory is best done with the human eye and doesn’t take very long.
A restaurant owner used it to redesign his logo and for inventory tracking and online menu updates, but keeps it out of front-end services and said he’d forgo using a chatbot online if customers rejected it. One bookstore-café owner decided to distance himself from the tool when he got backlash from a Google review and Facebook post for using it to create images on his menu.
Why this matters: As one professor whose research focuses on public trust in AI pointed out, many consumers pay close attention to how businesses use AI. This means that you need to be transparent with your customers and prepared to explain how and why the tool helps with your business and know when the human touch is necessary. (The Florida Independent Alligator)
Have customers ever pushed back on your use of AI? Let us know.
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The SKUpe is curated and written by Marcy Medina and edited by Bianca Prieto.
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