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Controlling Cash Flow For Small Fashion Businesses

By Maria Pesin | Business

Cash flow is a big concern for fashion businesses.  The industry operates on a seasonal basis and all costs need to be paid before you ship.  It is an especially big concern for new or smaller brands where they have not yet built a business with significant cash reserves.   Most companies don’t  ship every month of the year.  They also do not ship the same amount for each month.  Fall may be their biggest season and they ship most of their product in September.  Summer can be a very small season and they only ship a small capsule group. The ebb and flow of income  gets even more uneven if you sell something like bathing suits or coats.  These classifications sell the majority of product during 3-4 months of the year.  Controlling the flow of cash is extremely difficult.

“Despite the fact that cash is the lifeblood of a business — the fuel that keeps the engine running — most business owners don’t truly have a handle on their cash flow,” says Philip Campbell, a CPA and former chief financial officer in several companies and author of Never Run Out of Cash (Grow & Succeed Publishing 2004). “Poor cash-flow management is causing more business failures today than ever before.” Cash flow is of vital importance to the health of a business.  There is a saying that: “revenue is vanity, cash flow is sanity, but cash is king.”

In the fashion industry cash flow is critical.  Our costs for product come way before we ship and even once we ship receiving payments can take 30 to 90 days.  But this is not the only reason for cash flow problems.  Other reasons are:

  • Low profits or losses
  • Too much inventory
  • Bad Debt
  • Unnecessarily high overhead
  • Non productive use of funds

The question of how to handle cash flow is twofold.  How do you insure that you are not a victim of the above issues and how do you operate with the fluctuations of income?  Over the next several blogs I will discuss ways to manage your cash flow.

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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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