Tuesday, July 17, 2012

Do This Math - Now!

Do this math.  It is easy.  If you have a POS system worth a damn, it is really easy.

On the first of every month run a report that shows you your total Inventory at Cost that you have on hand.  Write it down.  Put it in a spreadsheet.  Just collect that number Every. Single. Month.

It comes in handy when you want to know whether you are getting the proper return on the money you spend on inventory, whether your inventory is too high or low, how your inventory (and hence cash flow) fluctuates, and when you need to think about having a sale.

Most POS systems don't actually track this number over time, only what you have on hand today.  So on the first of the month, after you say "Rabbit", find out your Inventory at Cost.

-Phil Wrzesinski
www.PhilsForum.com

PS  How does that number come in handy?  To calculate your Turn Ratio and Gross Margin Return on Inventory, you need to know your Average Inventory at Cost (those 12 numbers added together and divided by 12).  I figure if I remind you now, you won't have to do as much digging to get the numbers from the first 6 months of the year.



PPS  My 4th grade teacher taught us that if you say "Rabbit" as the first word out of your mouth at the start of the month, you will have good luck all month.  I've been doing it for over 30 years (who says you don't remember what you learn in school?) and it works.

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