The mistakes that cost you most

Running a retail business without strong financial systems is like driving without a map—you might get there, but it’ll cost you more in time, money and missed opportunities. Business manager Shira Podolsky helps small- and mid-sized companies fix that. She advises business owners on cash flow, ensures tax compliance and helps build the kind of internal systems that turn chaos into efficiency. 

In this conversation, she shares practical advice that retail owners can put to work immediately to strengthen their bottom line and safeguard against future challenges. 

—Written by Marcy Medina, edited by Bianca Prieto

What are the most common mistakes you see small businesses make and how do you fix them?

Watch your money and avoid skimping on accounting and employees. Too often, I see business owners who value saving a dollar over experience and proficiency. A new business may not have the capital to pay a high-end salary, but as the business grows, so should salaries and employee benefits. I cannot overexpress the importance of a strong and well-paid accounting team, which may likely start out as one person. The age-old adage of “You get what you pay for” applies here in spades.

What would be the first steps in building a business budget?

I encourage all of my clients to use accounting software even in a company's infancy. QuickBooks, for example, which does tend to be the industry standard of today, has a budgeting template built into the program. Most accounting software has the capability to upload your credit card and banking transactions and the budgeting tool will incorporate that into your proposed budget.  This will allow for a budget (your proposed plan of income and expenses) to actual (what you actually earned and spent).

Is there a standard amount of cash a small business should have in reserves? How should they plan for slow times? 

Save, save, save. When money comes in, move a percentage of those funds into a savings account to earn interest. 10%, 20%, 30%–there is no magic number; rather it's what your operating account can manage. I recommend only cautious spending and smart saving. You'll quickly learn how much your business needs to survive on a monthly basis. Know your industry and market trends. Pay attention to global economics so you can prepare for the unpreparable. Be smarter than the average bear and think ahead. 

How do you write a business plan that actually helps? Where would a small business start and what should they include? 

With the explosion of online resources and AI technology, writing a business plan is not as daunting as you may think. Intuit QuickBooks Online has a free business plan template–it walks you through your key presentation points and formatting. Google helps with customization to industry-specific examples. I encourage everyone to find their own voice and have their market research handy.  This will help you present your idea with clarity and individuality.

Many retailers operate with tight margins. What are the first three things you’d do to improve profitability without raising prices?

The first thing I would do is watch your operating costs; you have to run a tight ship. Too many business owners carry a lot of fat on their profit and loss in travel, meals and research costs. Don't treat your business like a personal bank account. Secondly, watch your payroll. Don't overstaff and watch those overtime hours; they can really be a killer. Finally, keep a close watch on your inventory and make sure you are selling at a markup that both covers your costs and that the market can bear. Usually, this means 2x or 3x wholesale cost. Try asking your vendors for volume discounts; larger retailers do this all the time and it never hurts to ask.

How can retailers use sales and inventory data together to forecast more accurately and reduce overstock/stockouts?

Avoid overstocking by hand-counting your inventory on a regular basis, or utilize bar codes and scanners when you receive and sell inventory. Keep accurate inventory counts so that you know what is selling and how fast. This will control overbuying and reduce understocking for the fastest-selling items and those that you know historically sell out during back-to-school and holidays. 

Retail cash flow often spikes during holidays and dips in the off-seasons. What strategies help smooth out the cash flow curve?

Every industry has seasonal highs and lows. Squirreling away money into a high-interest savings account during your peak months will come in handy during the off-season. Watch your payroll as well. Overtime and overstaffing can really eat up your cash. Watch those time cards carefully and as business dies down either late in the day or at slow times of the year, make sure you have just enough staff. No more and no less. This will help balance out costs for extra seasonal help and overtime during Black Friday and post-Holiday sales. 

Thanks for reading this week's edition!

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The SKUpe is curated and written by Marcy Medina and edited by Bianca Prieto.