Five cashflow tips for businesses which stock products
- 4 days ago
- 2 min read
Be ruthless with stock management to improve cashflow – that’s the message for SMEs in the North East from regional accountancy and business advisory group Azets.
Andrew Rowe, Office Managing Partner, working out of the firm’s Teesside office, urged businesses in and around Durham to think more strategically to tighten up their stock and inventory processes.
He provides these five key tips for businesses:
Utilise inventory management software. This is a critical tool to managing existing and new stock in real time to ensure that there is no overordering, to prevent cash being tied up in stock unnecessarily. Conversely, setting minimum stockholding thresholds will guard against popular lines of stock falling too low.
Make stock with high margin/high stock turn visual to sales team so they know what to sell. Communication is key. Inventory management software can flag up the products making the most money – ensuring the focus is on products with the greatest margin.
Do regular physical stocktakes/random stock checks. Things can go wrong even with the best systems in the world. Holding mini-audits and periodic checks is good practice. For large suppliers it needn’t mean disrupting operations. Spot checks can be carried out by crosschecking samples from shelves with the digital inventory and vice-a-versa.
Promise delivery within a few days. Keeping the delivery lead time as short as possible is obviously great customer service, but it also costs money to hold stock in warehouses or storage so the less time that it is held the better. Minimising the stock days and maximising stock turnover is key.
Calculate stock turn per item to identify slow-moving stock and decide if this should be discontinued: Software can show how long items have been held in stock. Consider whether those items taking too long to sell are worth stocking at all or if you need to hold as many as you are. Discounting slow-moving/obsolete stock may be an option.
Andrew, who works in close partnership with a wide portfolio of clients, large and small, said: “Stock and inventory management can be complicated but being absolutely ruthless with stock days, margins and warehousing is key to preventing an unnecessary drain on cashflow.
“Clearly, it can also support increased sales if there is a laser-like focus on the inventory data and customers see an enhanced level of service.
“Regular reviews can also lead to more informed business decisions and the identification of potential growth opportunities and shed light on possible issues.”
Azets, with offices in Durham, Newcastle and Teesside, employs more than 300 people in the North East, providing tailored accountancy, tax and advisory services to help businesses and individuals.
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