You’ve just wrapped a great month of sales, your foot traffic was higher than usual, and your revenue reports look fantastic. So, why are you finding yourself struggling to cover payroll and vendor bills?
When it comes to liquor store cash flow, strong sales don’t always immediately translate to available cash. If you’re still struggling to keep your business accounts from getting spread thin even when revenue is flowing, you’re not alone.
In this post, we break down the six most common cash flow killers that drain liquor store profits, plus actionable solutions to help you fix them.
Before we explore the cash flow challenges to keep an eye out for, let’s lay some groundwork about liquor store cash flow.
Cash flow is simple in theory. This figure is the money coming into your store from sales minus the money going out to cover expenses. But if you've been in the liquor business for more than a week, you know managing it is anything but simple.
Liquor stores face a unique set of challenges related to daily cash flow management, including:
The real challenge isn't just how much money moves through your business — it's when. Your biggest vendor bill might be due the same week your rent hits, sending you deep into the red. But if those bills hit one week later, you’d catch a holiday rush first, giving you plenty of cash to cover those bills (and then some).
Related Read: Managing Seasonal Inventory for Your Liquor Store
With this foundation in mind, let’s explore the challenges that are killing your liquor store's cash flow one by one.
Dead stock is a challenge for any retail business, but it’s twice as challenging for liquor stores with high upfront inventory investments. If you invest in a case of premium spirits and then those bottles sit gathering dust on your shelves for six months, you’re wasting both shelf space and capital that you could be using to stock staples and reliable bestsellers.
Related Read: 5 Essential Inventory Metrics Every Liquor Store Should Track
You also need to consider the storage costs associated with holding a large number of unsold bottles. You’re both losing money in terms of opportunity cost and actively spending money to maintain square footage of storage space for items that aren’t serving your store.
The solution is to use your point of sale (POS) and inventory data to identify slow-moving items before they become dead stock. Then, you can implement markdown strategies to move that inventory before it becomes a total loss. Then, adjust your purchasing patterns based on that data to avoid overpurchasing those items again.
Pro tip: A point of sale system like Bottle POS can grade your products from A–D in terms of sales performance. This scale system makes it easy to see which bottles are selling and which are not, at a glance.
In December, your store is buzzing. Customers are buying champagne, premium spirits, and party supplies. But if you want to capitalize on that rush, you need to stock heavily in the notoriously slow months of October and November, draining your cash reserves right when you need them most.
Seasonal swings are inevitable in liquor retail, but they don't have to wreck your cash flow. The key is planning ahead with a 12-month cash flow forecast that takes into account your store's unique seasonal patterns. Build cash reserves during peak seasons, like the holidays and summer months, so you have a cushion during slower periods.
Related Read: How to Increase Liquor Store Sales This Holiday Season
You should also plan major expenses like equipment upgrades or store renovations around high-revenue periods, and try to work with your vendors to see if there’s any wiggle room on payment terms for seasonal orders.
Pro tip: Use the historical sales tracking from your POS system to forecast for future rush and slow periods. This practice lets you know when your store’s peaks and valleys are, instead of relying on industry averages.
Your distributor drops off a pallet of wine on Tuesday, with payment due in 15 days. Depending on the season, it’s possible that you have to pay that vendor bill before you’ve sold a single bottle.
Standard vendor payment terms put the cash flow squeeze on liquor retailers. Cash on delivery (COD) or net 15 terms mean you need to lay down cash before any of that inventory converts to revenue. Some vendors will offer early payment discounts, but it’s awfully hard to take advantage of those when you don’t have enough cash on hand to swing it.
The solution starts with better vendor relationships. Try to negotiate net 30 or net 45 terms with your best vendors. Then, plan ahead and do your best to take advantage of early payment discounts during periods of strong cash flow — that 2% savings adds up quickly.
Liquor stores don’t have consistent cash needs every day throughout a given month. Operating costs hit at different times, with biweekly payroll, monthly rent, and vendor bills scattered throughout. Without clear visibility into your upcoming payments, it can feel like you’re constantly playing catch-up.
The fix requires both planning and monitoring. Create a monthly cash flow template tailored to your store that outlines when every major expense occurs. But that doesn’t mean you should only check your cash position once a month. Best practice is to review your cash flow at least once a week.
Pro tip: Invest in a liquor store POS solution with real-time sales and inventory data reporting so you can review your financial position at any time.
Credit card sales can create a frustrating timing gap for your cash flow. A majority of customers pay using credit these days — but with processing delays, those funds take one to three days to actually hit your account. This delay is how you end up with those frustrating scenarios where your POS data shows strong sales but your bank account tells a different story.
Fixing this problem is challenging, since you can’t control those processing delays. So, start with what you can control.
Implement dual pricing, where customers who pay cash receive a small discount while credit card users cover the processing fees. You might also want to shop around and find a payment processor that offers next-day or same-day settlement.
Many liquor store owners don't realize they have a cash flow problem until it's too late. Maybe a check bounces or a vendor puts you on COD-only terms. By the time these things happen, you're stuck dealing with a crisis. You're reacting instead of planning, putting out fires instead of preventing them.
Watch for these warning signs before things get critical:
These are signs that a cash flow crisis is impending.
The solution is simple, but it does require discipline. Establish a weekly cash flow review routine. Create a dashboard that displays key metrics, like days of cash on hand and accounts payable aging.
Pro tip: Your POS data is your secret weapon here. Invest in a solution, like Bottle POS, that offers built-in reporting. These regular reports act as your early warning system, flagging potential issues before they become emergencies.
Managing your liquor store cash flow isn’t a one-time fix. Solving for the challenges we discussed in this post is an ongoing practice that, when done right, keeps your store thriving in the long run.
If you’re feeling overwhelmed by all the suggestions in this post, don’t worry — you don’t have to do everything at once. Small changes compound over time. Tweak your reorder points one week, negotiate better payment terms with your biggest vendor next month, and work to build a cash reserve over the next season. Every step in the right direction helps.
However, the most crucial step in managing your liquor store’s cash flow is investing in the right tools. Without visibility into your vendors, sales patterns, and inventory turnover, you’ll struggle to identify your biggest challenges, let alone solve them.
The right point of sale and inventory management tool is the key to understanding your cash flow killers and seeing the path to fix them.
We built Bottle POS specifically for liquor store owners like you. Our all-in-one tool addresses your biggest cash flow challenges head on, with features like real-time inventory tracking, historical sales reports, and vendor management tools.
Ready to take control of your cash flow? Build and price your ideal Bottle POS solution today and see how the right tools can boost your bottom line and solve your cash flow problems for good.
Bottle POS was designed to be smart and simple. Instead of having hundreds of features that liquor store owners won't use, we concentrate on the features that really make a difference.
