As you look to grow your retail business and ensure you can maintain long-term stability, you will need to create and follow a retail budget. It’s one of the most important tools in small business retail management and can guide you as you make decisions, navigate unexpected changes, and work towards increasing cash flow and optimizing your profit.
Your budget is something you make annually and adjust regularly based on actual expenses. This is where a skilled bookkeeper or accountant comes in handy! They can help make sure your budget predictions are accurate, and assist you in adjusting it throughout the year.
Being able to handle unexpected expenses on the fly is perhaps a budget’s greatest strength. A small retailer might face anything from windows suddenly covered in graffiti overnight to a global pandemic that forces them to temporarily close their doors. Budgets can help you hope for the best while planning for the worst. Here are the most common expenses a small business owner should consider when making a retail budget.
Everyone knows that retail business owners must regularly budget for their sales associates and store managers’ compensation, but don’t forget to plan for the associated payroll taxes and employee benefits including their time off. Additionally, consider additional labor costs for marketing, graphic design, inventory buying, facility maintenance, and order fulfillment and shipping. Keep in mind that Xendoo can help cut costs here by providing retail bookkeeping and accounting at a lower rate than on-staff employees.
When you first open your brick & mortar retail business the list of expenses associated with getting your physical space up and running is long. Painting, installing new lighting and hardware, choosing merchandise fixtures, installing electrical outlets, and a security system. Landscaping, adding in new vinyl graphics for your doors and windows, and don’t forget about signs. And there are more costs to maintaining your facility than one might expect. You will need to budget for unexpected expenses like plumbing problems, roof leaks, and ongoing maintenance such as replacing lights, signs, and store fixtures as needed. If your business has a second location, you’ll need to make sure you budget separately for each space.
Your annual marketing budget will change throughout the year. As you plan it out, keep in mind what times of year are best for sales – around holidays like President’s Day and Memorial Day, and as the seasons change. Plan to budget for paid social media and influencer marketing throughout the year, as well as any email marketing expenses you may incur. And don’t rely solely on digital marketing – your business may get great exposure by marketing through community partnerships, events, and even by mailing postcards to your customers.
Inventory buying is one of a retail businesses’ most important and strategic costs to budget for. Retailers must prioritize inventory accounting, and keep a variety of things in mind like current trends, seasonal changes, and what sold well this time last year versus what didn’t. You’ll need to consider discounts and deals your vendors offer throughout the year, as well as freight charges. An excellent tool to consider using as you budget for inventory is an open-to-buy plan. An open-to-buy plan is an inventory management system that shows you how much inventory you can buy throughout the year.
Even the smallest of retail businesses need to budget for loss prevention. Keeping your inventory numbers accurate will help you determine how much shrinkage affects your business. Do you need to increase your security? Perhaps you need to invest in security cameras or loss prevention training for your employees. According to the National Retail Federation, retail shrinkage is on the rise —totaling $61.7 billion in 2019, which is up from $50.6 billion the year before.
As you plan and review your budget, look for spots where technology might be able to save you money. Are the systems you are using, like an eCommerce platform, credit card machine, and merchant services, or your accounting software too expensive? Are there cheaper solutions? Spend a bit of time researching options and you might find better solutions. Some of your providers might even work together, for instance, Xendoo customers get a discount on Xero and Quickbooks software.
Trust us, we know that staying on budget is often easier said than done, especially for small business owners who are stretched for time. A quality bookkeeper or accountant like the team at Xendoo can help you plan and stay on budget, as well as find areas where you can save money through accurate, timely reports and advice. Become a budgeting pro with Xendoo today.