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Retail Cashflow Problem Sorted

Retail Cashflow Problem Sorted

The problem

A suburban retailer, our client was facing cashflow problems (negative cashflow). Supplier bills were hitting before income had arrived – and whilst on paper they were profitable, there wasn’t money in the bank to pay creditors and tax bills. On-time payments were a continual problem.

Their “solution” was to put in $70,000 of their personal capital to keep the company going. It wasn’t going to work in the long run.

Our approach

The numbers tell the story – if you know where to look.

Advisory Accountants’s Business Builder tools help provide the analysis so we can clearly see the problem and the root causes. We produced a company health check and diagnostic report. A proper diagnosis would provide us with the information needed to work out an effective cure.

What we did

Advisory Accountants analysis highlighted what can be a common problem. The profitability of the company had actually increased but cashflow had become negative.

Our key findings were:

  • The debtor’s days had increased by 20 days in the last 3 months. Debtors were not paying on time.
  • Advertising, wages and delivery expenses were climbing.
  • Stock levels were higher than necessary.

We did the following

  • We put in place better systems of Debt collection.
  • Cost cutting measures were also put in place to control expenses especially no productive wages and advertising
  • We advised the client to buy more regularly in lower quantities so as to not tie up cash in stock
  • We also identified that they could increase prices by 10% without affecting sales.


It took three months before the changes had a visible effect. However, within 12 months there was a $100,000 increase in cashflow. As an added bonus, profitability increased by 16% as well.

What the client said

“The proactive steps taken by Advisory Accountants has got us out of cashflow difficulties and added another $150,000 net profit. This is a fantastic result in a recession year and a big thank you.”

Advisory Accountants: Wellington accountants, Porirua accountants, Wellington property accountants, Porirua property accountants, small business accountants, trades accountants, Wellington retail accountants, Porirua retail accountants, franchise accountants

Advisory Accountants provides business accounting and tax advisory services. Wellington, Porirua and NZ wide.

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