Getting the gift cards out

We will probably talk about this in the monthly e-retailer but for those that read the conversations, here is a head start. If you sold gift cards or gift certificates during the holiday season, now is the time you want to invite customers to redeem them. Logic would state otherwise; you have the customer’s money and the merchandise while the customer has this piece of plastic or paper.  What could be better?

Actually, you do want customers to redeem them as it will make your financial statement look better.  When done properly, you do not have a ’sale’ until the card or certificate is redeemed. What you have is a ‘deferred liability’ - you are holding onto someone else’s money until they decide to use it. I know this sounds weird, but this is how it is done in accounting.