| For the smaller inventory intensive businesses, | | | | inventory for resale, you should have a general |
| management of the inventory is a most | | | | idea of the market-selling price for those products |
| important task for the entrepreneur. | | | | and this is your best estimate for forecasting |
| Unfortunately, it is not always understood. In | | | | margins.Question your vendors about what is |
| many retail businesses, inventory is the largest | | | | moving and at what price levels. Do your own |
| asset on the balance sheet. Today's technology | | | | market research by visiting competitors and |
| allows even the smallest retailers to track their | | | | seeing what is being promoted and at what price |
| inventory and sales and to know what their | | | | levels. Track your sales carefully to understand |
| customers are buying.One of your most | | | | the margins you are enjoying on various classes |
| important activities is planning your inventory | | | | of products.There are a number of software |
| purchases. Too often, little or no planning goes | | | | packages for use with POS terminals that can |
| into inventory acquisition. Know what your | | | | help you track this important asset. Do not be |
| customers are buying and what is not moving. If | | | | satisfied that less than 50% of your inventory is |
| you don't know this, you can not plan your | | | | accounting for the bulk of the sales. Strive to |
| inventory. Don't buy yesterday's sales; buy | | | | move your entire inventory.Don't hesitate to |
| tomorrow's sales. Use yesterday as a guide, | | | | "distress sale" slow moving inventories. Some say |
| adjusted by your experience, research in the | | | | that destroys margins. How false a notion. If it is |
| marketplace and knowledge of your target | | | | on the shelf, it is providing no margin, only |
| audience. Forecast your sales as accurately as | | | | additional costs.Inventory costs include your cost |
| possible to insure your inventory matches those | | | | of capital, the allocated space and overhead costs, |
| forecastsAn important consideration in inventory | | | | insurance, the risk of obsolescence and |
| management is inventory mix. Mix includes size as | | | | deterioration and the final risk to small businesses, |
| well as fashions and style. Do you have | | | | shrinkage, the inventory that sometimes walks |
| everything the customer wants? If not, you miss | | | | out the back door rather than the front |
| sales opportunities. If you have inventory the | | | | door.Protect the inventory as you do cash in the |
| customer does not want, the cash used for that | | | | register. It is that important. Good inventory |
| inventory, but needed elsewhere in your business, | | | | management means continually adjusting your |
| is not available. Search for the right balance. One | | | | inventory mix to meet the customer's needs; |
| should look at inventory as cash sitting on the | | | | aggressively eliminating slow moving, obsolete and |
| shelves. If it does not sell, the "cash on the | | | | season ending inventory to recover the cash for |
| shelves" is doing nothing for your business, except | | | | another day; planning you inventory to match |
| increasing costs. Inventory that does not move | | | | your mix and sales forecasts; continually |
| within a reasonable length of time should be | | | | measuring inventory turn to increase revenue and |
| aggressively sold to recover the cash.Knowing | | | | profits; and managing your inventory to eliminate |
| what is selling and adjusting your inventory | | | | shrinkage.Using technology and having a positive |
| accordingly should result in improved inventory | | | | attitude about inventory management can |
| turns. One of the best ways to improve financial | | | | improve your performance and profits. Don't |
| performance is to increase the turnover, the | | | | ignore this part of your business because it is not |
| number of times the value of your inventory sells | | | | as glamorous or exciting as selling. Done right, it |
| each year. Revenue increases, without additional | | | | will put money in your pocket.Ed McMahon, MBA, |
| fixed costs, results in increased cash income and | | | | is the author of "Understanding Small Business". He |
| profit.Equally important is careful inventory | | | | graduated from Villanova U., City University of |
| management of seasonal items. Try not to have | | | | New York and completed post graduate work at |
| a stock room full of last year's inventory waiting | | | | the Stanford University Graduate School of |
| for next season. Not only is the inventory of no | | | | Business. He has extensive small business |
| value, it is incurring interest expense, storage | | | | experience as an owner, investor and counselor. |
| expense and the risk of obselesence. Inventory | | | | He taught Industrial Marketing at the graduate |
| planning is an important tool to prevent this.We all | | | | school level, bookeeping and accounting at the |
| know the market sets the price and the reseller | | | | business school level and has taught understanding |
| has little to say about the predominate price levels | | | | small business workshops for the past 11 years at |
| in the marketplace. But you do have or should | | | | the Junior and community college levels. He can be |
| have a great deal to say about the cost of the | | | | reached at usb@houston.rr. |
| product you are selling.When you purchase | | | | |