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Jewelry Sale Advisors offers a legacy of 65 years in the jewelry business, conducting going out of business sales, jewelry liquidation and promotional sales, turnaround and crisis management, retirement planning, marketing consultation and inventory management for jewelry stores, and appraisals.

Coping with a cash crunch: putting your business on good financial footing

By Jewelry Sale Advisors CEO Bob Epstein for Southern Jewelry News [ August 2006 ]

Cash is the lifeblood of every business. Without cash for inventory, payroll and other expenses, an emergency is imminent. Even a profitable business can experience not having enough cash at the wrong moment. One moment cash is flowing, the next moment it is dripping.

It’s an emergency when the cash flow stops and paralyzes your store. But if you still believe in the long-term viability of your business and are willing to work toward its success, put these six steps into action immediately. They are the foundation for avoiding future cash crunches.

Step One: Personally monitor all cash disbursements.

In a survival situation, cash management should not be delegated. Take personal responsibility for all decisions affecting cash disbursements. Dispense cash sparingly.  

Step Two: Face the situation squarely.

Look at the cold, hard facts.

List all your liabilities. How much do you owe lenders, suppliers, and others? When must they be paid? Make a list of all pending bills. Date them. Decide which bills must be paid, such as payroll, utilities, and vendor bills for current stock. Check all billings for finance charges and make a judgment on which ones will likely occur, and at what price.

List all of your sources of cash. Look for any areas that might produce immediate cash: sales, receivables, financing? Will these sources of cash eventually allow you to meet your debts and continue to operate your business?

Step Three: Get on the phone to all creditors.

Don’t hide. Call your biggest creditors. Talk with them. Remember, they want you to be in business. Look at some of your bigger cash outlays.

  • Rent: If permitted, delay payment by a week or two, whatever it takes to get through the crunch.
  • Vendors: Find out how flexible they are. Call them before they call you.
  • Lenders: Explain the situation to your banker, and find out what options exist.

Step Four: List all saleable assets.

Now is the time to liquidate superfluous inventory, fixtures, etc. Look at everything—even that old display shelf in the back room; another retailer down the street might be able to use it.

In storage you may have some old merchandise gathering dust. Brush it off and put it on sale. Get the word out about your sale and be sure to put the old products along side an appealing display of fresh inventory. Customers drawn to the store for the sale may choose to buy the new merchandise. If they see an attractive display of new arrivals, people won’t misinterpret your sale as a “going out of business” sale. 

Step Five: Prepare a cash flow budget.

This is your most important tool. We suggest that this first budget cover the next six weeks. This will help identify any shortfalls and possible sources of cash to cover them. This six-week plan is an interim measure that will meet your immediate needs.

Step Six: Cut and slash.

This is the hardest step and requires that you remain both objective and honest at the same time. Analyze all the aspects of your business allowing you to access cash. Look at how you operate your business and find areas that can be cut. Measure your actions by what will allow you to survive the immediate situation against your ongoing needs once through the current crunch.

Whew! You made it! These six steps were designed to help you in an emergency, but they also contain the foundation of an on-going strategy for controlling your cash. Now that you can breathe more freely (and the cash flow has increased a bit) take a more comprehensive look at your business.

Control the Cash

In order to properly control your cash, it is imperative that you develop a more detailed financial plan. Work out a monthly pro forma income statement for the next twelve months minimum, and preferably for two years. Likewise, develop a monthly cash flow forecast for the same period. Provide for adequate cash in your planning. In the above scenario you would want to include liquidation of any superfluous inventory or fixtures, etc., their estimated cash value, and date of sale.

Remember, cash is the lifeblood of your store, and a cash flow forecast is its backbone. Don’t predict unattainable results. Forecast only those profits you have every expectation of exceeding.

Develop a pro forma balance sheet for your business showing the next fiscal year end. If you’ve done your planning properly your pro forma balance sheet should show continuous strengthening of your turned-around business. Lenders are much more willing to cooperate when they are convinced the owner has a viable plan of action which takes advantage of strengths, neutralizes weaknesses, and is continually updated and monitored.

Use Honesty To Build Trust

You’ve leveled with yourself about your store’s situation. Now level with the other people affected by the crisis, namely your vendors, your lenders and the employees who are or will be involved.

If you have had difficulty paying invoices on time, chances are you have lost credibility with your suppliers. Regaining the ground you’ve lost is vitally important.  It’s a slow process, but it can be done.

Keep all appointments; return all phone calls. Keep the promises you make. If you aren’t able to pay an invoice on time, call the supplier and work out a payment schedule. Even a token payment can work miracles in terms of a vendor’s willingness to cooperate with you. A check, however small, shows your faith in your store. It is concrete proof that you intend to honor your debt.

Have you been late with loan payments? Ducking whenever you catch sight of your banker is not going to alleviate the problem. Schedule some time with your banker to explain your situation. Take your newly developed pro forma income statement, your cash flow forecast, and your pro forma balance sheet. When your banker sees you are planning realistically, he or she will be much more willing to work with you and even to restructure your financing, if necessary.

If you are occasionally a day late with payroll or have been forced to cut back employee hours, you owe your staff an explanation also. While it’s probably not wise to blurt every detail of the situation to your employees, they deserve to be informed.  Chances are they already have sensed the difficulties the business is experiencing. Trying to conceal facts will only erode your staff’s morale. If you enlist their support, you may be amazed at the loyalty they show.

When telling your employees about your store’s short-term difficulties, make sure you also convey your belief in its long-term viability. Most employees will be able to weather a period of uncertainty if they know that meeting payroll is your first priority.


Every operation struggling for survival is losing money in some of its components. As you developed your forecasts, you probably noticed some places where cash was bleeding out of your business without an adequate return. Plan to stop the bleeding; that is—cut out the losers.

Analyze your margins.  Analyze your sales figures for dead time. Instead of being open twelve hours a day, seven days a week, perhaps just six days a week for nine hours a day would be better. If you’re currently operating several stores, compare their profitability. Perhaps one or more of them should be closed. As you contemplate that toughest of all decisions, try very hard to separate your ego, pride, and other emotions. Survival may be at stake!

Look At Your Store With New Eyes

When you are experiencing a cash crunch, something is causing the damaged condition. But often, when you live with a business day in and day out, it’s difficult to recognize that problem.

Actively solicit input from the best minds you know. Naturally, time is of the essence. “What would you do if you were running this business?” Ask your spouse and relatives this question; ask your banker and other advisors; ask the most loyal employees. Ask sincerely, and you will get equally candid responses.

In every business, there are unlisted assets such as an outstanding salesperson, the location of a store, a list of loyal customers, and so on. Blow the dust off them, shine them up, and use them in your new concept. Utilize every asset you can find. A good place to discover underutilized assets is through brainstorming sessions with your staff.  “What do we have going for us that we take for granted or is not being used to its full advantage?” Your employees will like contributing, and the rapport you develop will enhance your teamwork approach.

Attempt to see your business through your customers’ eyes. What are they telling you about your store through their actions? Even though you may have to delay showing a profit, take care of neglected repairs. Your turned-around business should not look like a battlefield. Spread some paint, add some plants and repair equipment. Many stores are so intent on getting positive numbers on the bottom line that they, in effect, precipitate another decline.

Summing Up

Succeeding in the retail industry has always been a challenge. If you’ve made it this far, congratulate yourself. Then roll up your sleeves and follow through with some or all of these suggestions. Don’t stop taking the prescribed medicine the instant your cash crunch eases. Follow through. With flexibility and determination, you can show a steadily increasing profit. Isn’t that what it’s all about?


Jewelry Sale Advisors CEO Bob EpsteinBob Epstein is CEO of Silverman Jewelers Consultants. Since 1945, Silverman has been considered one of the premier sales consulting firms to the jewelry industry, specializing in improving cash flow and maximizing the recovery on distressed inventory through professionally conducted sale events. Bob can be reached at 843-881-3383 or by e-mail at [email protected].