Posts Tagged ‘Retail Reports’

How to Manage Obsolete Inventory

Friday, February 28th, 2014

question-markFor most retailers, poor buying decisions lead to poor cash flow. Obsolete inventory ties up cash. It requires close monitoring to maintain the appropriate level of stock. Spend time to review aging inventory and make adjustments to prices to sell slow-moving products and free up the cash to purchase more attractive merchandise. When possible automate reporting so that store and shelf inventory older than 60 or 90 days are flagged in your reports so that you can take abatement steps.

For all merchants, taking unplanned markdowns is difficult.  Build a small expense budget each month called “unplanned markdowns.”  Then, when stagnant inventory seizes your cash flow, use a planned markdown strategy on the most troubled products to induce customer sales. The markdown can be offset by the “unplanned markdown” expense line and not have as devastating effect on operations because the markdowns were already built into the budget.  Consider setting aside a specific percent of sales each month that is reasonable to cover unplanned markdowns. Begin with 1-2% and adjust as you gain more insight into this troubling issue. Over time you may need to set a fluctuating percentage as inventory from back to school, end of year and holidays may need to be aggressively marked down. Tracking and managing an unplanned markdown budget should also start to reveal patterns about your buying habits and your customer’s purchasing habits. Typical patterns to look for include  a local affinity for particular colors (Be smart about purchasing items in the local school colors in paper and other supplies.)

Savvy merchants create a markdown plan for stagnant inventory.  Product that is non-seasonal and simply is not selling may go on a 25%/50%/75% markdown plan where the price changes automatically every 30 days until all of the product is eliminated in 90 days.  Seasonal products typically need a more aggressive markdown plan that may be a 50%/75% markdown completed within 45 days.   Selecting a specific back end cap or other store location for the marked down goods also creates a good merchandising practice.  First, it removes poor sellers from the most valuable sales locations in the store. Second, it creates a destination for your bargain-minded shoppers who will regularly shop the discount areas. These bargain hunters can actually accelerate the cash flow and give your store a reputation for having great prices.

The Basis of Open To Buy for Retailers

Tuesday, February 11th, 2014

balance-weight-scale1Use a budget of expected expenses (use monthly averages for payroll, rent, utilities, supplies, etc.) combined with planned sales and purchases to create a monthly cash flow budget. Manage your store to that budget by making adjustments to purchases, pricing and payroll based on weekly sale rates. Give yourself visibility to early warnings about cash flow difficulties and take steps to abate them.  If you must, consider talking to your banker about unique situations where cash flow shortages are expected (especially prior to holiday or other seasonal inventory build ups.)  Ask for a line of credit – the interest on short-term loans will be cheaper than bank overdrafts and late payment penalties.

Balancing Purchases with Cost of Goods Sold (COGS) each month is critical.  The most simplistic early warning indicator for cash flow health is making sure that inventory purchased does not exceed Cost of Goods Sold for any given month.  Naturally, there are a couple specific times of year when inventories build up in anticipation of seasonal sales. But generally keeping an eye on inventory purchase levels is a smart gauge to measure cash flow. This, at its most basic level is the basis for an “Open to Buy” budget. Striking a balance between capital tied up in inventory and cash freed from that inventory in sales is critical to keeping any retail enterprise afloat.

June 2013 Retail Comp Report

Monday, July 22nd, 2013

CalendarHere’s June’s Retailer Comp Report Courtesy of our friends at Plummer & Associates.  Enjoy.  Retail Comp Sales History June 2013