5 Quick Tips On Cash Flow In Your Fashion Business

By Maria Pesin | Business

Apr 06

Managing finances in our business has its special challenges.  One of the biggest is money comes in at certain times of the year and goes out at different times. Usually it goes out first before it comes in.  So basically it can sometimes seem like feast or famine.  How do you handle this?

1. I suggest that my clients have a revolving line of credit with their banks so that when they are short there is money available.  I also suggest they pay it back as soon as they can. Because otherwise the interest eats into your profits. Don’t wait to do this.  You don’t want to negotiate credit terms when you are desperate for money.  You want to ask for it when you don’t need it. Start working on this as soon as you start your business.

2. Keep money in the bank for at least 6 months expenses that you know you will have every month.  Rent, payroll, taxes, etc.,  Having a cushion will not only give you peace of mind, but you won’t find yourself in disaster mode when payroll is due and you don’t have the money.

3. When you develop your line plan consider offering product that ships every month in order to have a more consistent cash flow.  You don’t have to ship your whole season in one month.  You can ship a different group each month.

4. Encourage your customers to pay quickly either by asking for a credit card when ready to ship or offering a discount if they pay by a certain date.  For example a common term discount offered in women’s sportswear  is 8/10 EOM.  That means you give the store an 8% discount if they pay within 10 days of the end of month the goods were shipped in. To illustrate: if you ship on March 15th then the bill is due by April 10th for the account to get the 8% discount.

5. Negotiate favorable terms with your suppliers.  Ask for 30 or 60 days to pay the invoice from the time it is shipped.  You may have to start with small amounts but if you pay on time religiously you will develop a confidence with the vendor who will be more open to larger amounts as time goes on.

 

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About the Author

Maria Pesin knows fashion, especially the business side of the fashion industry. Do you know how Manolo Blahnik got his start in the industry? How he leveraged a paltry 3 grand into one of the world’s most famous luxury brands? While she doesn’t take credit for Manolo’s success, Maria has walked a similar path on numerous occasions. The world of fashion is not silicon valley, and it has nothing to do with Madison Avenue marketing. In this industry there is ALWAYS room for something new and exciting, but you have to have your ducks in a row. If that’s what you need, believe me, Maria is the General Patton of fashion ducks!

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