Take the Stress Out of Your Financial Operations
At the 2015 NAMM Show, former CPA Lori Supinie of Senseney Music shared her financial knowledge with music retailers eager for smart tips. As a small business owner herself with a passion for music, Supinie knows firsthand the financial challenges that fellow retailers face.
“As a store owner, you may or may not perform some of these financial functions, but you need to oversee the process and review the results,” she said.
Here are Supinie’s 10 financial tips to reduce stress and maintain good control of a music retail business:
1. Prepare a budget. It sets expectations and clearly communicates to staff what’s important to you. A store’s budget is also tied to manager accountability and can be used as part of the manager’s compensation or incentive package to ensure he or she is doing the right things. Supinie stressed the importance of the budget as a tool to focus everybody in the same direction.
2. Do a monthly, timely bank reconciliation. It’s critical to pay attention to your bank statements. “You should be the person that’s opening and reviewing the bank statement,” said Supinie, adding that she reconciles her statements within a week of receiving them. “Cash is the lifeblood of our organization, and if we don’t know what’s happening with our cash, then that’s not good financial control.” She encouraged retailers to be vigilant to deter employee theft and embezzlement.
3. Prepare monthly financial statements. You always need to know your financial position. Do financial statements at least quarterly, and review them with an internal or external controller. As you review the statements, look for big-picture items. Supinie advised retailers to compare current financials with the previous year’s financials—and the overall plan.
4. Practice good internal control procedures. Supinie stressed that all business transactions should be authorized, properly executed and recorded, and accountable. She commented that point-of-sale systems are so well-designed that they let you follow a trail if you have questions about a financial transaction. Hire competent, responsible, detail-oriented employees, and cross-train them, especially if you run a smaller operation. Put rules in place for controlling your assets, such as having designated employees who can purchase inventory.
5. Do delegate, but don’t advocate. “When you give up some piece of oversight in your financial operations, you can’t just walk away,” Supinie said. Eliminate situations of motive and opportunity.
6. Make good cash flow everyone’s responsibility. “Our business is a cash pump,” she said. “Cash flow is not just an accounting problem—it’s everybody’s problem.” Focus on reducing errors in buying and invoicing, make good buying decisions, and establish prudent credit policies. Educate your staff.
7. Ask for help. Find mentors in the industry. Even vendors are a resource. You can also connect with experts through community business schools, the Small Business Administration and music industry organizations, such as Retail Print Music Dealers Association (RPMDA) and NAMM Young Professionals.
8. Arm yourself with knowledge. Lifelong learning is part of your business, and it’s easy to take advantage of free resources, such as NAMM U and other industry organizations.
9. Communicate with your bank. Share your financial statements with your banker, accompanied by a conversation. (Supinie said she does this quarterly.) Make a point to meet with your banker at least once a year, and give him or her the good news and the bad news, including major strategic issues you’re facing, competitors, market updates, and your future expectations and needs.
10. Maintain a good relationship with your vendors. Pay bills in a timely, consistent manner, and alert vendors if you need to make a late payment. When negotiating or speaking with your vendors, look for win-win situations, such as “If I purchase this inventory, can I schedule payments?” If you’re a good partner with them, they’ll be a good partner with you.
With these financial best practices, you’ll know where your business stands at any given time, and it will make difference in your business and life.