Prioritizing Cash Flow: 10 Areas to Review for Improved Cash Flow and Profitability

Transcript

 

Welcome to booked the bookstore education podcast brought to you by The American Booksellers Association. In this episode, we'll be featuring prioritizing cash flow, a session that ABA presented at the 2024 fall regional Association trade shows. Hello everybody. My name is Lee Hooyboer. I'm the Director of Education here at the American Booksellers Association. Today, we're going to be talking about cash flow, what it is why it's important, and what steps you should take now to make sure you have enough cash in the bank going into this holiday season and beyond. Here at ABA, we've heard from more stores who are struggling with cash flow in the last five months than we have in the last five years. So know that if you are feeling panicked right now, you are not alone. My hope here is to lay the groundwork for understanding how to manage your cash flow and provide some tools to make sure your store can keep doing the Lord's work by putting books into the hands of your community. You've heard the phrase cash is king, but that's actually from a longer quote that I think better illustrates some of the critical fallacies small businesses make revenue. In other words, your store, sales is the sexiest measure of success. It is deeply satisfying to watch your sales figures rack up over the course of year. So that said, you might as well be playing Candy Crush, because a high score on your sales line doesn't actually mean much if you don't have actual money in the bank to pay your bills. A couple years ago, we presented a session during the regional shows on understanding your profit and loss statement. The P and L provides the framework for your store's financial success. So digging into the individual line items allows you to find opportunities to keep your overall profit in the black. But here's the thing, at the end of the day, even if your sales are strong and that bottom line on your P and L statement looks good. That doesn't mean you have actual money in your actual bank account each time rent is due, pay day rolls around, publishers come knocking or an unexpected emergency occurs. That is where cash flow management comes in. Michael Dell of Dell computer once talked about how his company made the mistake of prioritizing their profit and loss statement over their cash flow, saying it was like we were driving along watching only the speedometer when, in fact, we were running out of gas. The net income statement, aka the profit and loss statement, is like the speedometer of your car. It's the gage you glance at to make sure you're maintaining healthy momentum. However, your income statement isn't going to tell you how much further you'll be able to go before you need to put gas in your tank. For that, you need to look at your gas Gage, the cash flow statement. As drivers, we've trained ourselves to keep half an eye on the needle of our car's gas Gage. We don't want to get stuck on the side of the road, so we know we need to fill up before that needle slips too far toward the empty side of the gage. There are, of course, those people who will wait to fill up until the dreaded gas light turns on, which you know who you are, but living on the edge like that means that you're beholden to the gas station gods, and limits your choices of where you'll fill up and how much it will cost. The rest of us keep our eye on the gage that we can plan the timing of that Costco trip to get the good, cheap gas or fill up the tank before heading out on a big trip. Cash is the gasoline of your business, and your cash flow statement is the gage that lets you know how much is left in the tank. The last financial statements in this metaphor is the balance sheet. It's the oil Gage, which provides a full snapshot of the health of your business at a moment in time. In this session, though, we're going to focus on the gas gage and strategize around how you can use your cash flow to know when and how to fill your tank. We're going to break down cash flow management into five key steps, which is really 10 steps, but five is an easier number to remember, and I'm throwing a lot of numbers out at you today. So number one, know your flow. We're going to talk take a quick look at the cash flow statement, then talk about how to use forecasting to plan out your cash flow for the month, the quarter and the year. Number two, manage the ins and outs. Cash flow is all about when and how money is coming in and out of your bank account. So we're going to look at some strategies for finagling the timing and getting into the flow. Number three, reduce your costs. Paying small bills is way easier than paying large bills. So we'll take a look at some strategies for reducing the outflow. Number four, find the money you need to have money to pay for things. So we'll take a look at some options to boost your inflow when your regular sales line isn't cutting it. And number five, in case of emergency, you might have to break the glass. We'll talk about a couple last resort options for what you can do when you need a quick fix for your store at the end of the session, my hope is that you're able to review your store's cash flow with only a. a. Moderate amount of anxiety, knowing that you have some tools at your disposal to iron out rough patches and make sure you have the money in the bank when you need it. Going into this holiday season, there is a ton to cover, but know that this slide deck, as well as the templates and sample spreadsheets that we put together for this presentation are all available on book web.org so you can check that out whenever your busy schedules allow. This session is also being recorded and will be available in our on demand education section on book web, as well as in our bookstore education podcast booked. Okay, let's get into the flow as we touched on earlier. Cash Flow determines your source ability to cover day to day expenses such as purchasing inventory, paying suppliers and meeting operational costs. Just to get this out of the way, when I'm talking about cash here, I am not talking about the paper bills that are handed to you by that adorable seven year old paying for the newest dog man that is called cash in hand because it is literally in your hand, or in the register till or in the drop state for the office, but you can't actually use that money to pay for things until you put it into the bank. Once you've put that paper money into your bank account, along with all the non paper customer payments from credit cards, checks and such, that money in your account is now the cash I am referring to when we are talking about cash flow. In this session, you have to put the money into the bank in order to use it good. Okay, we're also not talking about sales or revenue. If you are looking at your income statement, the net sales line tells you how much you've sold, but it doesn't tell you what's been paid for or how much is in your account. At a given time, your sales are part of your inflow, but they do not account for your outflow. A business's cash flow looks more like this, much like your personal checkbook. If you still go that route, it records the comings and goings of your bank account. You start, one hopes, with a positive cash balance at the beginning of the month, cash comes in from customer payments, investments or loans. Cash. Cash goes out to pay bills and salaries. Your ending cash is then brought forward to become the starting cash balance for the next month. There's a ton of movement in and out of your account over the course of a week, a month or a year. The main flow we tend to think about is the income from customer purchases, but your inflows also include capital from investors, loans or grants, money you make selling fixed assets or rental income from any property that you might own. Then you are all probably keenly aware of the outflows. Money leaves your account every time you pay employee wages, buy more books from publishers, hand money over to your landlord, pay your utility bill, or throw money toward repayment and interest on your loans. Unfortunately, all of that movement in and out of your bank account doesn't happen evenly throughout the year. Because bookstores have seasonal spikes in sales and expenses, they end up with a lumpy cash flow. Most bookstores see a massive spike in sales during the holiday season, when November and December sales account for 20 to 40% of sales from the entire year, and even in December alone, that can be double what you'd bring in during a regular month. On the other hand, stores and resorts town and resort towns may have their big sales season in the summer, when tourist season hits, those massive variations don't just affect the cash inflow. You also need to spend a ton more money to have enough inventory to sell during those months, so your outflow will see a hit as well. You can smooth out a lumpy cash flow by planning out your year ahead through cash flow projections, making sure you have access to credit before you need it, and making payment schedules work for you, and covering additional revenue streams, or considering additional revenue streams, we're going to cover these points in detail later in this session. The key thing here is that sales is not cash flow and profit is not cash when it comes to your store's financial sustainability, cash flow is more important than sales or profitability. If you strategically manage your store's cash flow, you'll be able to make sure that you have the right amount of cash on hand when you need it. Cash flow management involves forecasting future cash needs, ensuring that there are sufficient funds available to meet those needs and managing any excess cash in a way that maximizes its value. The first step to understanding your cash flow is knowing how to read your cash flow statement. A cash flow statement tracks the inflow and outflow of cash, providing insights into a source financial health and operational efficiency, it measures how well the bookstore generates the cash needed to pay its debt obligations and fund its operating expenses. You might also see this report referred to as the sources and uses of funds statement, because accountants really like their jobs and tend to name things multiple ways. It comes from your accountant or. Your accounting software, but I've included a sample in our workbook to help us understand what we're looking at here. So let's take a quick look at our example. The cash flow statement starts with your beginning cash balance. It shows what you have in the bank at the start of the statement period. The statement is then divided into three major categories, operating, investing and financing activities. The Operations Section will look fairly familiar to those who watched our decoding the P and L session. It includes many items from your income statement, like cash flow from sales tax payments, vendor payments, payroll, rent and other operating expenses. It'll also take into account some of your assets and liabilities, which are the ones who show up on your balance sheet instead of your income statement, such as your inventory, which can be converted into cash through sales or returns. The investing session section includes purchases or sales of assets or equipment, along with any loans made to vendors or received from customers. The third section, financing focuses on the flow of cash to and from investors and banks, such as dividends and repayments of loans made by the store. All three of these sections are tallied up to show the total change in your cash balance over the course of your statement period, which leaves you with the ending cash balance that tells you how much cash you now have on hand. In the most simplistic terms, positive cash flow means that your store earned more money than it spent during a given period of time. That said, it's critical to keep in mind that your store's core operating activities, like revenue and expenses you see on your income statement only account for one part of your full cash flow picture. Your store also needs to ensure sensible investing and financing activities to keep your cash flow positive. A negative cash cash flow will clue you in to problems with your operational expenses, as well as reckless investing and financing activities, which should be cause for major concern about your store's financial health. It is critical to evaluate your cash flow statement in the context of the other financial statements and business factors to get a holistic view of your store's financial health. If your cash flow statement is your past, your cash flow forecast is your future. Cash flow forecasting estimates the expected flow of cash coming in and out of your store across all areas over a given period of time. It is a critical tool for helping make you make informed financial decisions for your store. Forecasting will help your business maintain enough cash to meet short term obligations such as payroll, rent and supplier payments, as well as long term goals such as future investments, expansions. Forecasting also provides early warnings of potential cash shortages. This will give you time to take corrective action such as securing additional funding or adjusting your current spending. There are five main steps in creating a cash flow forecast. First, we're going to review our past financial data to identify trends and patterns in your cash flow. Next, we're going to estimate the future sales based on your current market conditions, business plans and your store's historical performance. Look ahead at future expenses and try your best to predict future expenses your store might incur. Consider both fixed and variable costs as well as planned investments. Since bookstores have that lumpy cash flow, you'll need to adjust throughout the year to account for seasonal fluctuations in sales and expenses, and most importantly, you have to continuously monitor the actual store data. Are your sales lower than you planned? Are expenses higher? Did an unexpected opportunity arise. Don't think of any cash flow forecast as written in stone until it's time to do the next one. Continually evaluate your forecast and make adjustments as needed. Now if you are already starting to panic because you do not have a formal cash flow forecasting spreadsheet for your store, please take a moment to take a breath. Y'all do a simplified version of this every time you look at your sales tape at the end of the day and say, Yeah, that sounds about right. Most stores have a vague idea of what they should be expecting the inflows and outflows to look like, but getting it all down on paper will let you live less on vibes and more on data. To that end, I did put together a cash flow forecasting template that you can plug your numbers into, which you can find in the bookstore, resource library on book Web. Let's walk through it together. To start off, you're going to have two sets of data in your forecast, the historical data from last year and your predictions for this year, when you are building out your forecast, you'll split your projections and projections into two main components, cash in the inflows and cash out the outflows. The cash in Section includes sales revenue, so your educated guess of how much you're going to make in sales each month, it also. Includes receivables, expected payments from schools B to B and other revenue that comes through on payment terms. We should also include any other additional sources of cash, such as interest income, grants or asset sales. Here, the cash out section includes personnel expenses, such as payments for salaries and owner compensation, occupancy expenses such as payments for rent, utilities, maintenance and repairs, cost of goods sold, tax payments and other day to day expenses in advertising, travel, business, insurance, credit card fees. This should all look fairly familiar for those who, again, have watched the decode in the P and L session from a couple years ago. Our outflows will also include a loan payment and payment to vendors, which will fluctuate from month to month as bills for books that you've ordered and hopefully started selling start to come due. All of this then comes back together to show you your beginning cash balance, plus your cash in, minus your cash out, which leaves you with the ending cash balance for that period. We're going to look here at the we're looking here at the full year projection. But the key to managing your cash flow is timing. So let's break it down just a little further, because timing is everything when it comes to cash flow forecasting, the whole point here is to ensure that you have the right amount of money when you need it. So we want to break your inflows and outflows down into meaningful time periods to make sure you'll have sufficient cash on hand to pay your expenses, since expenses need to be paid throughout the month. Forecasting out week by week allows you to see problems you might have overlooked with a monthly or quarterly forecast. For example, payroll comes out twice a month, and even bills that have different due dates can come out at different weeks. So reviewing your cash flow by week gives you a much firmer grasp of your source ability to fulfill your financial obligations when they do arise. That said, setting up your forecast by month will give you a fairly solid grasp of whether you'll have enough money to in the bank to pay your bills when you need to. Once you've plugged in some numbers, you'll be able to start seeing trends or areas for concern. In this sample, you can see that our 2023 cash flow stayed solid, but was slowly depleted over the first half of the year, then ran into the red come September and didn't wake it make its way back into the black until the holiday season. Sales brought in enough revenue to make up for that lumpy cash flow. When projecting out the forecast for this year, we can use some of the tools we'll discuss in the remainder of the session to get those inflows up and those outflows down to make sure that we stay in the black going forward, your final task in your forecast is to add an actual column to your spreadsheet to indicate where you actually landed each quarter and month. This will give you a more accurate picture of your store's financial performance and help you find those red months so that you can be better prepared for future forecasting. And remember your Indian cash balance for the year is what starts you off for the next year. So last year left us with almost $60,000 in the bank. Great job. That is more than we started with. So you are feeling flush and decide to give your staff or yourself some nice bonuses, maybe invest in those fancy new shelves you've been dreaming about. You figure your 50,000 is a nice round number, so you're going to spend 10 grand of the money that you have in the bank and start your next year off with 50,000 bucks in the bank. Your cash flow forecast is going to immediately tip you off that initial to this issue in this because looking ahead, you'll realize that that change dips you into the negative, starting last month, when you are forecasting, create and test out various best case and worst case scenarios that your store might go through. This will help you identify potential variations in cash flow and prepare for various contingencies. For example, what if you decide to invest in equipment? What if you add three people to your team? The results of these scenarios can help you decide whether to make certain investments and think about how to bolster cash in various periods, update the cash flow forecast frequently. While it is best to do this as frequently as every month, be sure to at least update forecasts every quarter. You need to adapt to changing market trends. So when was last time you did a customer survey or asked your best customers what they value most and what they want that you're not providing? Are you paying attention to these changes? Evaluate your business continuously. Don't be too optimistic. Uh, assume lower sales and higher expenses so that any surprises are happy surprises not Well, I guess I'm eating ramen this month. Surprises build in variances into your cash flow forecast. This helps to account for unexpected costs. Or other small changes in totals. You can also just include an other category in your expenses and drop some numbers in there to make sure that you're beefed up. Do not mix personal and business matters, like paying for business expenses on your personal credit card. This can have tax and liability implications, and it makes it really difficult for you to have a true picture of the financial health of your business. Track the key indicators of your source financial health, they can be the first sign that your plan is off track and that you need to make minor adjustments to avoid major changes challenges later, your ABACUS annual report gives you a whole score score card of the many of these KPIs, which can give you an idea of where you stand based on other indie bookstores. Digging into these gives you a wealth of information about next steps that you can take to improve your source performance, but it also provides a critical heads up on adjustments that you should make to your forecast so that you can plan accordingly. For example, if you notice that your dollars per transaction are decreasing, this might indicate that consumer spending is slowing down, and you may want to adjust your sales down in your cash flow forecast so you're not taken by surprise. A huge, huge, huge shout out to everybody who participated in the ABACUS survey this year. The report was just released, and you can find it now on book web or linked here in our slide deck. How are you all doing? That was a lot of numbers. So I want you all to take a deep breath and look at how dorky My cat is when she forgets that her tongue exists. Okay, feel better. Let's get back to it. We've looked at our reports, which give us an idea of how we're doing and where we're going, but now we need to actually act on that information. When it comes to cash flow, how you get paid matters, and how you pay your bills matters. Let's start with the fun stuff, your cash inflow. While there's no fixed playbook, there are general best practices that most bookstores will find helpful to improve their cash flow for school orders or outside sales, make sure that you send out the invoice right away and include a due date to ensure prompt payment. You can automate invoicing using software such as QuickBooks or use the bookstore resource library template. If invoicing folks outside of your POS is preferable. You can offer small discounts or some other incentives for early payment, like a 2% discount if paid within 10 days, or if you're struggling to get folks to pay on time. I have met schools, you can offer a small discount to encourage a late payer to actually pay up. Offer flexible payment options make it as easy as possible for people to give you money by accepting various payments such as credit cards, bank transfers and digital wallets like Apple Pay. Or if your cash flow is super tight and you need to ensure the money hits your account right away, you may need to do the opposite and consider not taking checks, since those can take up to 10 days to clear a lot of stores do not deposit their cash in the bank daily. It's easy to let those daily deposits pile up at the bottom of your safe because you have a billion things to do, and driving over to the bank every day after work does not make it to the top of your list. Unfortunately, not only is that a huge security risk for the store, but it also is actively affecting your cash flow for your business. It is critical to get that money into the bank. So even if you really can't get to the bank every day, make a system for yourself to ensure you're making deposits regularly, collect Co Op payments promptly. Are you collecting 100% of direct and indirect Co Op use, all of the co op money that publishers allow. Are you receiving Co Op credit in a timely manner? Are you checking to make sure you actually get those credits? Make sure you're collecting your bookshop.org proceeds regularly. You'd be shocked by how many stores don't set up their bookshop pool accounts correctly and aren't collecting the money they've earned, do not leave any money on the table. Credit card processing fees are a huge pain point for small businesses, to the point that your credit card processor might be making more money from your store than you are. While the ABA is currently working with legislators on swipe fee reform, you can educate your customers about how pain with cash helps your business. Over the summer, avid bookshop used their newsletter to provide their community with this beautifully executed letter about how cash flow issues were affecting the store and their customers experiences. They discussed the various payments and tied that data back to the store's values and mission, saying, while 10% or sorry, while $10,000 might be a drop in the bucket for a large business, for us, it is a big hit to our bottom line, and it's hard not to imagine what we could do with those 1000s. They followed this up with a list of specific actions their community could take that would support the store, including using. Cash or checks when possible to make sure that the store keeps more of the sale, allowing them to stay profitable and continue to support their community. Now for the outflow, because of those massive credit card processing fees, many vendors have implemented credit card surcharges to pass those processing fees onto the customer. In this case, you to avoid paying processing fees on both ends of your flow look into which of your bills offer cash discounts and set those up as payments through debit or ACH, even if a vendor doesn't explicitly mention a surcharge or discount for a cash payment, it doesn't hurt to ask if a cash discount is available, particularly if you have a long term relationship with them as a customer. All of that said, credit cards can be an incredible tool for managing cash flow when used strategically to pay your bills. Credit card companies offer a variety of rewards programs that you can capitalize on to decrease your payments. Choose credit cards that offer high rewards for categories where your business spends the most, or get a card with cash back program that can provide you direct can provide cash directly to your statement balance. Because credit cards are basically short term loans, they allow you to strategize your payment timing for purchase you to make, and give you a built in window between when the purchase occurs, when the billing cycle closes and when the payment is due, the key is to make sure that you've actually made a plan to have the money when the payment comes due, so that you don't run the risk of racking up credit card debt and the accompanying high interest rates. Timing is everything when it comes to cash flow. So schedule your bill payments to make sure that they're not all coming out at the same moment. Work with your vendors to stagger your invoice due dates throughout the month. Take advantage of due dates, grace periods, payment plans or extended dating to hold on to your cash as long as possible. Here's an example of staggering your bill payments. In this sheet, you can see the store pays its utility bills at the end of the month, while the telecommunication bills are paid within the first week, they also have scheduled their insurance bills to be paid in the third week, so it evens things out. Automate and streamline your payments. Sign up for automated Accounts Payable systems like bill.com This reduces errors, ensures timely payments and helps maintain good supplier relationships. Use electronic payment methods for quicker processing and better cash flow management. ACH transfers, which move money directly from one bank account to another, like you use for your payroll, direct deposits can be scheduled to ensure payments are made on time without any manual intervention. Sign up for batch, for books, to reduce data entry efforts and save time with batch, publishers transmit invoices and credits as soon as they have them, so you can reconcile your invoices immediately. Batch users reported saving more than 20 hours a month by using batch. We've put together a slew of resources on how to get started with batch in our nd ABCs campaign page, we've been rolling out the nd ABCs this year as a call for source to commit to three specific actions that are critical to the foundation of our collective future. Report your financials to ABACUS, sign up for batch and make your sales count by reporting your sales. If all independent bookstores took these three actions, we could reshape our industry. So check out the nd ABCs campaign page on book web for information and peer pressure your book selling colleagues to do the same. Strategize your publisher payments. Negotiate payment terms with publishers and request extended payment dates. This was one of ABA priorities at the annual publishers meetings this year that said, be sure to plan your extended payment dates out on your forecast, so that you aren't just kicking payments down the road if you don't have a plan to pay them later, if you end up in a tough spot with with your publisher payments, be sure to keep at least one account, Probably your primary wholesaler in good standing, so that you can lean on that while you work on paying down your other accounts, make sure that you're taking advantage of Publisher rebate programs and stock offers. Ingram has an exclusive indie program called book Love that triggers rebates upon reaching a specified annual sales goal. Indie's first ABA national campaign to support independent bookstores is held every year on Small Business Saturday in the weeks leading up to the event, publishers put together special stock offers on their titles, which we've compiled an ongoing spreadsheet that's available on book web and will be continued to be updated leading up to indie first, these stock offers help improve your cost of goods by holding on To more money when you are buying up for the holiday season, when push comes to shove, analyze your bills and break them into categories required bills such as payroll taxes and rent important bills and then flexible bills pay by prioritizing. In that order, you can consolidate your debt at a lower. Interest rate. What does your debt currently look like? What are your interest rate, percentages, principles, monthly payment amounts. We've looked at some strategies around the timing of inflows and outflows, but when all is said and done, spending less money leaves you with more cash. So there are a gazillion sessions we've done over the years on improving inventory management, but let's take a quick look at a couple points where inventory management directly impacts your cash flow. Smart buying will ensure that you aren't tying up cash on your shelves. Keep track of out of soft stock books that your customers ask for, including those online sales you might not be running directly through your POS. Be open to ideas from your frontline Booksellers. They are the folks that know what your customers want, what you have on the shelves and what you need to buy. Use Edelweiss to watch your best selling watch out for best selling titles that you might be missing out on. This is also a great way to keep track of books that other stores have or that you've run out of, Edelweiss Analytics provides an absolute wealth of information about your store's sales performance. So reach out to the Edelweiss team, or check out the session from winter Institute last year on Edelweiss analytics at your store, which I linked to in this deck, analyze your sales data and just and adjust your inventory levels based on your current sales, identify the best sellers and focus on stocking items that have high turnover rates. This will ensure that you have optimal stock levels and reduce the capital tied up in inventory. Make sure to order enough copies of important titles so that you aren't having to panic and eat a lower discount from the wholesaler or miss out on a sale entirely. Adjust your inventory levels based on seasonal demand patterns to ensure that you minimize excess stock during the slow times. You can offer discounts or promotions to clear out slow moving or obsolete stock, but be wary of training your customers to expect books to sell below the list price. We have seen what that has done to the industry. Use ABACUS to monitor your cost of goods sold and to determine if you are optimizing your buying we put together a handy one sheet to help you. Take a moment to review the other key areas where ABACUS can help optimize your cash flow. Returning books is about more than just clearing space on your shelves, unsold and unreturned inventory is also tying up your store's cash flow. It affects the quality of the inventory you stock at the store, and it limits the space for the books and merchandise that will actually sell. However, do not overuse or only use returns for improving your cash flow. Empty bookshelves are not a good look for a bookstore, and we still need to be able to show sufficient inventory in the store on the shelves for our customers when they visit. Plan your return strategically align them with the bill due dates for that publisher, where possible, return unsold inventory to suppliers for credit or exchange ahead of sending out your large orders, many publishers allow deduction for returns in transit these days. Be sure to be regular about your returns in larger stores. A slight change in the criteria of returns can cause your stocks to build up, so be vigilant and look for changes in return policies. Recalibrate the return schedule for your store accordingly. Outside of inventory, there are ample opportunities in your other operational spending categories to make ostensibly small but holistically meaningful reductions in your expenses. As a retail business, the vast majority of your cash is tied up in your inventory. This chart shows a quick P and L breakdown pull from the forthcoming ABACUS report, and gives you the This chart shows a quick P and L breakdown pulled from the ABACUS report that was just released, and gives you a solid idea of where a bookstores money is going, while Cost of Goods Sold accounts for over 50% of your store's expenses. There are still ample opportunities in your other operational cost categories to make reductions. Here are five quick ish ways to curb your expenses. At the store, negotiate and shop for everything, insurance supplies, payroll providers, banks, shipping software, accounting software, negotiate discounts for bulk purchases or long term contracts. Compare pricing from different suppliers to ensure competitive pricing, you can use ABA partner discounts to make the best decision for your store, optimize your staffing expenses, regularly review your payroll expenses and adjust staffing levels as needed in your store. You can use part time or temporary staff to handle peak times instead of hiring full time employees, most POS systems have reports that will let you dig into what your sales numbers are on different days of the week or at different times of the day, using those reports to align the distribution of staff hours with the flow of customers, so that you have more staff working on busy days. The week and fewer staff working on slower days, revisit your your opening hours. If your sales are minimal after 7pm it might make sense for you to shift your store hours so that your staff are there earlier in the day and you aren't paying staff to work when customers aren't buying. Monitor your stores utility and insurance expenses. Do you have analog phones or cell phone expenses for staff, if you still have phone bills, are you auditing them? Check and compare your rates every six months to assess for potential cost savings for your stores business, insurance? Could you increase your deductibles or downgrade your coverage? Have you shopped your policies in the last two years to see if you can get better rates. Compare your rate to the coverage, compare your current rate and coverage to ABA, bookseller insurance program, and then go with the lower rate or leverage that to create more competition and improve your rate and coverage with your current provider. Compare your credit card processors. Do you have the lowest credit card processing rate possible for both online sales and in person sales? Many stores have two different vendors and forget to negotiate both rates or combine them to get a better rate together. Negotiate and shop your rate, you can use ABA partner gravity payments to price out your options and then go with the lower rate, and most importantly, understand your stores P and L statement. Take a look at the decoding the P and L session from the 2022, fall regionals, where we dove into the individual line items of the P and L so that we could help identify opportunities for improved profitability. Part Four, find the money you need to spend money to make money, but you need to make money to have money to spend. So let's look at a few ways to boost your inflow. If your sales line isn't cutting it, there are a few couch cushions we can shake out to bring in some additional income. Bookshop.org, continues to play a critical role in the financial sustainability of indie bookstores, especially smaller stores. According to the 2022 ABACUS report, the net the average store's net operating profit was 1.8% but bookshop.org proceeds contributed to the stores bottom line adding point 6% to that net income before taxes. As of September 2023 nearly 2000 books, independent bookstores were participating in bookshop.org school, but last year's ABACUS report revealed that 14% of reporting stores didn't have any relationship with bookshop.org which is leaving critical income on the table, even if your store is receiving the proceeds from the pooled bookshop.org funds, there are huge gains to be made on an individual level through bookshop.org affiliate programs, wish lists and registries, embeddable widgets book fairs and marketing opportunities. They even put together a handy one pager on some simple steps to take if you haven't touched your bookshop page in a while, called I haven't touched my bookshop page in a while. So check that out LinkedIn here. Explore pop up options and passive income opportunities. Are there possible pop ups that would be low maintenance, extensions of your store's brand or sales opportunities for your store, consider space rentals at your store for events like Oxford exchange and P and T knitwear have done here. They've formalized a space rental program, and they provide clear information on their site to encourage customers to take advantage of it. As someone who got married in a bookstore a couple years ago, I can personally attest to the fact that the fine folks at King's books absolutely, absolutely should have charged us for the space rental. Bless their hearts. That said, while passive income streams are a great option to improve your source cash flow, it is critical to create systems that allow for operational efficiency and that continuously engage in those programs to generate the actual additional income, explore sponsorship and advertising opportunities. Would anyone sponsor or advertise at your events or in your newsletter or in your E newsletter? Here's an example from how village books in Bellingham, Washington allows other books businesses to promote their services in their quarterly print magazine. If you can sign books, you can monetize the consignment service and help offset related expenses to make it more financially viable. Mini sport, mini stores offer a small fee to authors who want to participate in their consignment programs, which again, helps offset the cost of the staff time involved in managing those titles. Take a look at what other stores are offering and design a program that works for your store by stealing their work and making it work for your store. Consider grants to support. School sales or other areas of business, you do not need to be a non profit store to tap into grant funding. For instance, Waucoma Bookstore in Oregon worked with one of their local schools this year to get a $750,000 grant, which the school used to buy books from the bookstore. Waucoma was also able to fund virtual school visits and use that grant money to purchase books for all of the students in kindergarten through second grade. We did a whole grant writing session at winter institute a couple years ago that you can watch on book web, which will give you a great introduction to tapping into grant funding for your store when you are in need of a quick infusion of cash. There are a few short term financing options that you can tap into for your store. These options are normally more accessible than traditional loans, but they come with higher fees and riskier terms than those traditional loans, so you need to be diligent about your payments, make sure you have a plan, and be wary of becoming dependent on these sources for your long term cash flow needs. The most common type of short term loan is a business line of credit, which can be used for a variety of purposes, from financing inventory to short term business expansion. A line of credit is a form of revolving credit that allows you to withdraw money as needed, as opposed to a typical loan that's paid in a lump sum. Lines of credit typically have lower interest rates than other short types of short term loans, which makes them really flexible cash flow tools to help with unexpected expenses and sales decreases. Securing a line of credit before you need it is a great insurance policy, and can also be really useful for seasonal buying that said, if you are not paying it off after the holidays, then you're becoming dependent on it and you have a cash flow problem, the Small Business Administration has a micro loan program that provides loans up to $50,000 to help small businesses start up and expand. Micro loans have lower interest rates compared to traditional loans, but they also provide smaller loan amounts, with the average micro loan running around $13,000 while micro loans are accessible for small businesses, they may require more paperwork and a longer approval process. The remaining two options here are best suited for last resort situations. With a merchant cash advance, you would receive a lump sum based on your projected revenue from credit card payments, which you then repay using a percentage of your future credit card sales, in addition to a fee. Essentially, the financing company is purchasing your future sales, which you then repay as sales come in, they are easy to qualify for, and you won't have to make large payments when sales are down, but the fees make them more costly than traditional financing options, and you won't save money by paying early, since the cost is based on effector rates and as opposed to compounding interest rates, short term loans have a repayment period, typically ranging from three months to three years. They offer quick access to a lump sum of money with a predictable repayment schedule, however, they have higher interest rates compared to long term or loans, so the monthly payments will be substantial. As much as I would like to promise you that a pretty spreadsheet and some solid processes will get you through the rough patches. We all know that is not how life works. Here are some break in case of emergency options for when your store is experiencing a cash flow crisis. If you have worked your way through the previous eight steps that we discussed, look into creating a fundraising campaign for your for community support and an influx of cash. Fundraising campaigns can take a variety of forms. So in lieu of setting up a bake sale in your parking lot, many stores have turned to crowdfunding sites for either startup costs or for emergency fundraising, like East Bay Booksellers did here after their fire in July. But some stores have also turned to their community for direct financial support during times of cash flow to rest, like book tree did here. There are a variety of crowdfunding platforms like GoFundMe and Indiegogo, but you could also consider direct fundraising on your store's website, like Keaton Lloyd, I've done here. Stores using indie commerce can easily add a button to collect donations which customers can add to their carts on purchase. In the early days of the pandemic, many stores turned to bonfire to create fundraising merchandise, like this limited edition t shirt that bookshop Santa Cruz did while bonfire has continued to provide a great source for general store merchandise, potentially returning to the limited edition bonfire fundraising model is a great way to generate community support and a much needed income stream during times of cash flow duress, if you haven't already, take advantage of ABA partnership with bonfire, which you get the first design, custom, free, it's critical. It is absolutely critical to note that relying on fundraising campaigns to improve your store's cash flow is not a sustainable long term business. Model, consider this as a last resort step you can do only once for your store, as repeated fundraising runs the risk of desensitizing your community to your business needs. Last year, I ran around the country at the Fall shows to tell you about all of the terrible things that could happen in your store from natural disasters and break ins to cyber attacks and cars crashing into your building, all of these things will wreak havoc on your cash flow. So review the this is a fire drill session video on book web to help mitigate the risk. Now, preparing your store for emergencies and other unexpected expenses is all the more important in this election year, when we all know that sales are down and cash flow is already tight, if your store is in cash flow address, send up a flare. Reach out to your landlord to negotiate rent abatement, talk to your accountant about whether you can defer sales tax or look into deferring employer payroll tax if needed, but only do so with a good cash flow projection and plan in place. Contact your local small business development center, and, most importantly, contact ABA for advice. Our membership team has can be reached at info, at book web.org, they can help you find the resources you need on book web, or connect you with someone who can help. ABA CEO, Allison and CFO PK, who were Booksellers for decades and have these fancy MBAs under their belts, are also available to help review financials, make suggestions and share resources, and they've been working with stores individually, so we encourage you to reach out. We also do have a slew of resources available on book web.org, under the education landing page, the on demand education page contains recordings of previous education sessions related to cash flow and financial management. And the bookstore resource library has a cash flow forecasting template that we used in this session, as well as budgeting and monitoring workbooks that you can use to dig into your financials further. And as I mentioned at the beginning, this recording will be available on the on demand education page and will be posted to our podcast booked. I know that was a lot, but it is crucial for source starts to start taking steps now to make sure their cash flow is in order. Given how our political climate is right now, expect your stores to continue to be affected. So plan and project your cash flows accordingly. If you need help, reach out to ABA and we can help you strategize to make sure your cash flow is healthy going into this holiday season and beyond. Thank you for listening to book to the bookstore education podcast, brought to you by The American Booksellers Association. Don't forget to subscribe to the show on your favorite podcast, app, additional educational resources can always be found on the ABA [email protected] happy reading. You.