Your Stock Turn: The Third Cause of Poor Cash Flow

Carrying stock for too long means full shelves but an empty bank account. Similarly, if you’re a service provider and are taking a long time to bill for your services, then you’re carrying too much stock in the form of work in progress. Consider that work in progress a form of virtual stock.

You can calculate your ‘stock turn’ by taking your cost of sales from your annual financial statements and dividing it by your average inventory (or work in process). Most clients need some help from us to work this out, so don’t worry if you don’t understand straight away; we’ll show you. Expected stock turn rates vary from industry to industry, so it’s important you don’t compare your inventory turnover to other types of businesses.

The key is to convert stock to cash faster. Ask yourself these questions, just for starters:

Do you have a stocking strategy? Do you determine safety stock, desired stock levels, and re-order points for each stock category?

Having a stocking strategy is crucial for efficient inventory management. It involves determining safety stock, desired stock levels, and re-order points for each stock category. A well-defined strategy ensures optimal stock levels, minimizes stockouts, and maximizes cash flow. Consider implementing a strategic approach to stock management to enhance your business operations.

What software do you use to measure how much stock you have on hand at any given point in time?

To measure stock levels accurately, consider using inventory management software. It provides real-time visibility into your stock on hand at any given point in time. Such software can track inventory movements, monitor stock quantities, generate reports, and even automate reorder notifications. Investing in the right inventory management software can streamline your operations, improve inventory accuracy, and support better decision-making regarding stock management.

What clear policies do you have to ensure you have no slow-moving stock items?

To prevent slow-moving stock items, it’s important to have clear policies in place. These may include regular inventory assessments, monitoring sales trends, and setting up thresholds for identifying slow-moving items. Consider implementing strategies like promotions, discounts, or bundling to incentivize the sale of slow-moving stock.

Additionally, proactive measures such as conducting market research, staying updated on industry trends, and optimizing procurement can help prevent the accumulation of stagnant inventory. By establishing and adhering to clear policies, you can mitigate the risk of slow-moving stock and improve overall cash flHow much is stock shrinkage (theft, damage) costing your business?

Stock shrinkage, including theft and damage, can significantly impact your business’s profitability. It’s crucial to evaluate the cost of stock shrinkage to better manage it. Implement security measures like surveillance systems, access controls, and employee training to prevent theft.

Additionally, proper handling and storage procedures can help minimize damage-related shrinkage. Conduct regular stock audits to identify discrepancies and address any issues promptly. By quantifying the cost of stock shrinkage and implementing preventive measures, you can safeguard your inventory and preserve your bottom line.

Do you have a formal stock ordering system so that stock levels don’t blow out?

Implementing a formal stock ordering system is vital to prevent stock levels from getting out of control. A well-designed system helps maintain optimal stock levels by considering factors such as demand patterns, lead times, and sales forecasts. It ensures timely reordering, avoids stockouts or excess inventory, and minimizes carrying costs.

Consider utilizing inventory management software that automates reordering based on predefined thresholds or integrates with suppliers for seamless procurement. By establishing a formal stock ordering system, you can optimize inventory levels, improve cash flow, and enhance overall operational efficiency.

Take control of your cash flow today!

These are just some of the ways to improve your inventory turnover. If the stock turn is impacting your cash flow, HartPartners can help. Calculate your stock turn, optimize inventory levels, and convert stock to cash faster. And if you think your stock levels might be stifling cash flow in your business, make time to see us.

At our Cashflow & Profit Improvement Meeting, we’ll use our calculator to show you how much cash you can unlock in your business by reducing stock turn with a simple action plan.