Sales Are Up. Where Is the Cash?

The first thing we do is stop reporting a group of stores as one number, because one number hides the weak location. Each store gets its own income statement with its own occupancy and its own labor, which is usually the fastest way to find out that the group is being carried by two of the five.

That works as long as transactions can be identified by store, which in practice means the payroll and the point-of-sale feed have to agree on what the stores are called. Where they do not, that is the first thing to fix and it is a small job.

Gross margin return on inventory investment shows which items earn their shelf space, which a simple margin percentage does not. Once products can be ranked that way, buying and markdown decisions stop being a matter of instinct. It is built from your point-of-sale and inventory data rather than from the ledger, so what can be ranked depends on what your system exports — and for most retailers that export already exists and has never been used.

Shrink that is only discovered at an annual count is a number you cannot act on: by then the quarter it happened in is closed and the cause is gone. Cycle counts are how it becomes manageable. Your team does the counting — we build the schedule, reconcile each count to the books, and report the variance by category so a pattern is visible while it is still happening rather than in a single annual surprise.

On the tax side, smaller businesses are excused from the complex inventory-capitalization rules and may use simplified inventory accounting instead. Eligibility rests on average gross receipts over the prior three years against a ceiling that rises with inflation, so it is worth rechecking each year.

Inventory is bought months before the cash comes back, and that gap is where retailers get into trouble even in a good year. We map your seasonal working capital cycle so you know when cash goes out, when it returns, and how deep the trough gets. A line of credit arranged against that map is part of a plan; one arranged in the trough is a scramble, and it is priced like one.

Apparel deserves separate attention, because the rules are state-specific and counterintuitive. New Jersey, for example, exempts most clothing and footwear, but the exemption is decided item by item rather than receipt by receipt, and accessories, sport and recreational equipment and most protective equipment fall outside it (New Jersey Division of Taxation). Other states draw the line in completely different places.

The practical consequence is that the tax setting has to be right at the product level in your point-of-sale system, because a single basket routinely contains both treatments and an audit will examine the items you coded as exempt. We work out which of your lines are taxable and which are not, check what your point-of-sale is actually charging against that, and review it when you add a line or open in a new state. Changing the setting is a keystroke; knowing which items need it is the work.

Store leases now sit on your balance sheet. ASC 842 is fully in effect for private companies, so a retailer records a store lease as a right-of-use asset with a matching lease liability rather than simply expensing rent. That changes balance sheet totals and the ratios a bank or a landlord looks at, so loan covenants are worth checking against the restated figures before someone else checks them for you.

Fixtures and buildout run on the other track. 100% bonus depreciation is permanent for property acquired after 19 January 2025, but many states do not follow it and cap section 179 far below the federal limit, so the federal and state answers on the same fit-out can differ sharply.

This page is about whether we recognize your situation. Each state's own clothing rules, the inventory-capitalization mechanics and the lease measurement work are handled against your own facts in an engagement — and the thresholds move with inflation, so we check them against the year being filed rather than restating them here.