When it comes to running a successful retail business, there are a multitude of moving parts to consider, from the nuances involved in the buying of product and merchandise, to the importance of marketing and customer attraction and engagement. It’s a complex pursuit, requiring merchants, particularly those operating small- and medium-sized operations, to pay close and ongoing attention to a number of different components of the business. As a result of limited resources, this necessity often means that business owners are overburdened by the tasks at hand and left unable to run their businesses as effectively and efficiently as they could. However, by ensuring healthy cash flow, says Christina Riechers, Head of Product, Business banking at Square Banking, merchants can free up their time and redirect it toward the areas of the business that need it most.

“Cash flow is critically important,” she says. “When cash flow is not managed well, it can cause a lot of stress and anxiety for business owners which then permeates through the entire operation. Conversely, when cash flow is healthy and not a cause for concern or stress, business owners can make better business decisions, including better financial decisions, like purchasing inventory in bulk at a discount. Without the stress and burden of worrying about cash flow and whether or not there will be enough money in the bank to pay employees, merchants are also able to make better strategic decisions and focus more of their time and effort on other areas of the business, making enhancements that will lead to continued growth and success.”

Impediments to healthy cash flow

Though ensuring healthy cash flow within the business is easy enough to suggest to merchants, Riechers goes on to explain that there are a number of factors that often impede their ability to do so. However, she adds that there are also ways by which these impediments can be overcome, or at least alleviated, relieving some of the undue pressures that often result. The first impediment is the association between a slow or decrease in consumer demand and sales and the fixed costs that any business incurs as a direct result of their operation.

“Sales might slow unexpectedly from time to time,” she says. “Hopefully they never do. But fluctuations in demand and sales are a fact of doing business. What don’t fluctuate, however, are a business’ fixed costs. In light of this, I always encourage sellers to take a hard look at their fixed costs. Do you have contracts for things like payment processing or POS hardware that saddle you with fixed costs even in your slow season? Square started because we were adamant that sellers should only pay for what they used, which is why sellers who take payments with Square only pay a variable rate when they make a sale – no contracts, no fixed costs, no monthly fees.”

Closing the payment gap

Another way in which merchants are challenged in their efforts to maintain healthy cash flow, says Riechers, is the discrepancy in time between the moment that goods are paid for and when merchants receive payment for those products. It’s natural within a business, and to be expected, that there will be a gap separating these two pieces of the process. However, Riechers explains that leveraging relationships with suppliers and asking them to negotiate on payment may serve to close the gap significantly.

“Most often, a seller pays for inventory long before they’ve even had an opportunity to sell it to consumers,” she says. “This can often cause sellers headaches and confusion, resulting in cash flow mismanagement. To help solve for this, it might be a good idea for sellers to benefit from some of the stronger relationships that they’ve built with suppliers and ask them if they’d be amenable to negotiate a later payment date for goods. You might be surprised – some suppliers view their relationship with merchants as partnerships and are open to discuss more agreeable terms if it means moving more product, faster.”

Access to funds

Riechers goes on to explain that another obstacle in the way of merchants properly managing their cash flow is the lag that occurs after an item sells and when the seller has access to the funds. The reason for the lag, she says, are in limitations inherent in traditional payment processors. There can be few things worse for a merchant than waiting to be able to access funds that have already been earned, which is why Square has decided to do something about it in order to ensure that sellers receive funds in a timely manner.

“At Square, we noticed this as one of the major challenges faced by merchants when it comes to managing their cash flow,” she acknowledges. “To address the issue, we introduced two new products in Canada. With the free Square Card, a seller processes a sale and can instantly access that money using their Square Card. Or, if a seller prefers to have their sales proceeds go to their traditional bank account, they can use Instant Transfers to instantly send their funds to their bank account for an additional fee.”

Supporting the industry

It’s yet another way in which Square, whose suite of solutions and hardware make sure that payments accepted by a merchant are immediately synced with the rest of the business, seems to have the best interest of Canadian merchants at heart and serves as an example of the innovation that the company continues to develop and introduce for its merchants. And, according to Riechers, it’s an approach to payments that will continue unabated and qualities that have helped position the company as one of the industry’s most trusted providers of technology and payments processing solutions.

“One of our goals at Square is to enable sellers to achieve their targets and objectives by providing them with the very best tools and solutions available, ensuring greater flexibility for their businesses. We want to see merchants within the industry succeed and to continue growing. And we want to be one of their trusted partners helping to support that growth and success.”

For information concerning the ways Square and its suite of commerce solutions can help your business optimize opportunities for success and growth in an increasingly digitized world, visit https://squareup.com/ca/en

*Retail Insider partnered with Square for this content.

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