My business coaching Story Part 3 of 3

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Remember that stock on the storeroom shelves does not sell. It only sells once it is placed on the shelves in the shop. An annual stocktake tells you the total value of the stock you carry and the unit count of each of the items in stock simply as it is at the time of the stock take. This is not enough to maintain a proper control over your stock.You need to carry out weekly random checks of popular and highly priced items to ensure that any goods missing off the shelves have actually been sold and the money received and put through the register. Shoplifting, as we well know, is a plague retailers have to live with, but if not properly monitored it can often mean the difference between making a profit and showing a loss. Whilst it is difficult to control shoplifting from without, the process of regular random checks could deter it happening from within. That said, it is also a good way of checking the rate of stock movements to ensure sufficient stock is always available to meet demand. Let us now deal with the issue of stock turns. Say the average stock turnover in your store is four times per year and your average GP is 50%, accepting the 80/20 rule which says that 80% of your sales are generated by 20% of your stock, meaning that some items have a much higher turnover than others. The simple fact is that the more stock turns you achieve the less stock you need to carry and the more gross profit you can make. It is how you manage your stock that can make all the difference. Based on the above we can say that every item on the shelf in your store should be turned over at least once in every three months. Therefore, anything sitting on the shelf longer than three months and not sold even once during that time should be cleared out and the money used to buy more frequently sold stock. When you buy stock you are expected to pay for it within 30 days of the month following the delivery of the goods. Have you ever stopped to think that if you have four stock turns a year you are actually only getting paid for your stock around 90 days from the date of purchase. This means that depending on the level of the stock, you have a lot of capital tied up in stock. So when you work out the mark-up on the goods you are selling you need to take this into account. And as already mentioned, the more stock turns you achieve the harder your money will work for you, and the lower the cost of finance. This will help increase your business profitability and give you a better cash flow. See example at: LFP .If, despite all that has been said, you do achieve budgets and run a reasonably profitable business, just think of how much better off you could be if you followed the above. For those who are still managing their stock manually, it is strongly suggested that you lash out and get yourself a computer and a suitable software program that can be easily tailored for your business requirements. You would be surprised at the difference this could make to the way you can manage your stock and run your business. And the big difference it can make to your life

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