In his three decades as an accountant, Gene Marks has frequently credited smaller business owners for teaching him critical financial lessons. One of the most impactful was from the late Jerry Crawford, a carpet wholesaler based in South Jersey who passed away ten years ago.
Crawford operated out of an unassuming building and employed approximately 50 people, supplying both local and national carpet retailers. Marks notes that while reviewing Crawford’s financial records, he observed a significant reserve set aside specifically for product returns.
This practice represents a standard approach in business accounting where companies offset future liabilities by establishing a financial buffer for anticipated returns. However, Marks highlights that many small enterprises overlook this strategy, potentially jeopardizing their financial stability.
Easier said than done when you’re barely making payroll. Maybe a theoretical concept for most small shop owners these days.
RIP Jerry Crawford. We used to buy from him years ago. Seems like he was ahead of his time on cash flow management.
Does this reserve cover shipping costs too, or just the product value? That distinction matters for thin margins.
Standard practice for large firms, but small businesses often miss it. This is a solid, practical piece of financial advice.
I never thought about setting aside money for returns until reading this. Great reminder to plan for the unexpected.