How to manage stock
Retail has been around for thousands of years, so a lot of thought has gone into managing stock. Business owners and accountants agree it’s important to nail:
ordering stock – you want enough, but not too much
paying for stock – it’s important to keep your suppliers sweet
valuing stock – it affects the value of your business (plus tax and insurance)
There are lots of moving parts in a store. To place accurate and timely orders, you need to understand the supply side and the demand side of your business.
How much stock will you carry?
Inventory doesn’t just tie up money, it costs money too. Some items will inevitably get damaged or become obsolete while they’re in your store room. Be smart about how much you have sitting around. Maybe hold lower volumes of items that are perishable or that can be quickly replenished.
Using apps for inventory management
Software can keep count of inventory for you. It can even integrate with a point-of-sale system (POS) to help you predict when stock will run low, and suggest when to order.
Scan new items as they arrive into the warehouse and the software will automatically add them to your inventory.
Items are removed from inventory as they’re processed through your point-of-sale system.
Paying for inventory
Supplier bills can come in thick and fast, and you don’t want to risk getting offside with any of them. To keep them sweet, you need solid cash flow and a reliable process for paying bills.
Taking care of cash flow
You’ll generally have to carry the cost of inventory for a long time between buying and selling. That means a lot of your money is locked up and unavailable for other expenses.
There’ll be times when cash gets low. Try to anticipate when that’ll be, and make a plan for getting by:
Create cash-flow forecasts: Map expected income and expenses on a calendar to project what your bank balance will look like over the coming months.
Make a plan: When you see a low period coming, consider delaying expenses, organising a loan, requesting longer payment terms from suppliers, or shrinking your orders. Or do something to stimulate sales, such as running a promotion.
Paying bills on time
When a retail business is humming along, there’s tons happening. Even if you’re flush with cash, it’s easy to get behind with bills. Build a process that won’t let you or your suppliers down.
Open and check invoices as soon as they come in
Make sure you got what you’re being charged for. If not, raise queries straight away – not on the day the invoice is due.
Check the payment terms to see how long you’ve got, and decide on a day to pay that works for your cash flow.
Make the payment
Either put it in your diary or schedule the payment with your bank. Banks even allow you to schedule batch payments for several suppliers at once.
Record the expense
Enter the cost into your business accounts so you have an accurate picture of your finances.
Chapter 3: Selling from a store
You won’t be in retail for long unless you’re selling stuff. Learn how to make it easy for customers to buy from you, and see what else a good sales process can do for your business.Read chapter 3