Following on from my post last Thursday, here are tips for improving cashflow, to make it easier to settle supplier accounts on time and thereby improve leverage for better deals and terms.
- Set a budget for purchases, focussed on what you can spend and when you can spend it based on accurately anticipated cash flow.
- Quit dead stock. This should be a quarterly process based only on what is not selling. Dead stock has no value. Even cents in the dollar realises some value.
- Have an employee theft mitigation plan. Employee theft usually costs at least two thirds of theft and total theft in a business like a newsagency usually costs between 3% and 5% of product revenue. Cutting theft can free cash.
- Trim your roster. Labour is usually the second or third highest operating cost in a business. Every hour saved is cash released for inventory.
- Move work from the back office. If you price goods or manage returns from the back office, shift this work to the shop floor. Sales will improve as a result. This can be done without any increase in costs.
- Chase a deeper basket. Increasing average sale value improves shopper efficiency. banking more margin dollars per purchase improves your cash position.
- Have a new traffic strategy. Every new customer is valuable. A retail business not pursuing new customers, outside the business, is a dying business.
While some of the tasks on this list will be unappealing, they are key to improving business cash flow and improved business cash flow enables you to pay for stock on time and this helps you run a business that is more appealing to existing and new customers. It feeds into greater success for the business.
Hi there, can you tell me what you do with your dead stock. Thanks
Quit is, fast and, ultimately, at the price customers want.
So Mark, don’t worry about making a loss? Just get rid of it? Do you put it at the back of the shop or up the front?
Wherever it sells fastest. Dead stock has no value unless you sell it for something or free the space and put something that sells in its space.
Mark,
some time ago you wrote about purchasing stock when buying a news agency, 0-6 months old at 80% wholesale 6- 12 months at 50% wholesale any older do not pay anything, are these figures correct or can you provide the link for the post.
Thx
Jason I recall writing the post but can’t find it right now. I am overseas on business. Give me a few days.
Mark,
Re point 4. Labour is usually 2nd or 3rd highest operating cost. What can be higher than labour other than premises ?
Colin, rent is the answer. Some retailers consider cost of goods to be an operating cost so that is why I wrote it that way. The reality is, labour is 1 or 2 in my experience.
Hi Mark,
I’m interested in reading the post about purchasing stock when buying a newsagency, which I’m about to do!
Hope you can find it and send a link.
Cheers
Rod
Canberra
https://www.newsagencyblog.com.au/2010/05/03/if-you-are-buying-a-newsagency-dont-be-ripped-off-at-the-stocktake/
Also: if stock is more than six months old, negotiate a discounted price as that age, and beyond, indicate less likelihood of being able to sell at retail.