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It is not normal for small business owners to report that end-of-year sales were on target or much better, but available cash was less than expected. It is also not uncommon for their financial consultants to suggest that the cause of the cash shortage is associated in part to Inventory Value management.
The Inventory of a company is generally divided into two categories: Asset or Fixed Inventory and Inventory-for-Resale.
Asset or Fixed Inventory includes such products as vehicles, equipment, furniture, office equipment, real property, proprietary information as well as other valuables. The components and elements of this category of a company's Inventory usually remain constant subject to only upgrades or re-evaluations that happen from time-to-time. Those same financial consultants are particular to review the Fixed Inventory at least annually to guarantee that their business client will appreciate the optimum tax benefit. On the other hand, Inventory-for-Resale is the part of the company's Inventory that is purchased for resale as either a part or a component of a fabricated or assembled deliverable. My recommendation to small business owners is to view Resale Inventory as cash on the shelf that can't be used until it is sold rather than as a part waiting to be sold.
Inventory-for-Resale is sensitive to price changes and to time on the shelf both of which affect the Value of the part or product. When the unit cost of a Resale Inventory part or product is increased by the supplier or vendor, accordingly the value of any of the same parts or products on the shelves of the company's Resale Inventory also increases.
This principle is all too often overlooked or ignored by many small business owners. Their thinking is not to charge more because the part or product has already been bought and paid for so why charge more. Consequently, the usual result is that the product or part is sold using the original purchase cost rather than the present purchase cost. In other words, dollars are lost and cash availability lessens.
The policy of pricing a part or product for resale based on the actual purchase price has an even greater impact if the purchase price for the Inventory-for-Resale part or product is commodity driven as commodity prices can change very frequently. Petroleum, scrap metal, aluminum, and copper are among those commodities that experience frequent changes. Price increases can happen in hours. I recall some years ago when working with a rebar company in California that the price for a truck load quoted the afternoon of one day changed upward the next day when the client's truck arrived to pick up the order.
Small business owners don't ignore or overlook current values as much with commodity parts or products, but far too many will. When they do, usually many more dollars are lost and cash availability lessens even more.
Purchase price is only part of the equation however. Time on the shelf is a significant contributor to Resale Inventory Value. Selling and replacing (turns) of Resale Inventory usually translate to a greater contribution of cash. The more frequent the Inventory Turns, the greater the percent of cash to the general fund. That's percent, not quantity. A million dollar part may only need to turn once a year to contribute a great deal to the general fund whereas one hundred dollar parts could turn twelve times and not contribute as much cash. However while possible, the million dollar part scenario is a statistical outlier and consequently not a sound foundation for an inventory management policy.
However frequency and consistency are sound foundations for an inventory management policy. Frequency links to Time on the Shelf or Inventory Turns. The more frequent the Resale Inventory turns (sold and replaced), then the more cash availability increases. Twelve turns a year is fantastic. Eight to ten turns a year is very good. Anything less than six turns can be problematic for cash availability.
When a part or product is purchased and resold as either a component or single part within a month, then the part or product will have recovered its purchase cost and will have contributed the appropriate amount to the company's Fixed Costs or Overhead within a month.
Unfortunately, what happens all too often is that the part or product sold was in the Resale Inventory for many months or even one or two years or more. The consequence of this scenario is that the income generated from the sale of one or more other parts or products funded the purchase of the part or product on the shelf some time ago. Now months or one or two years later the part generates income, but it is too little too late. At the very minimum, a part or product for resale should be sold within twelve months to have the slightest chance of recovering its purchase cost and contributing to the business overhead as is expected of Resale Inventory.
Consistency equates to setting a policy and sticking with it. Consistent resale and contribution to operating cash is what a business needs from its Resale Inventory to assure expected cash availability both monthly and at year end.
What can the business owner do?
One obvious solution is to move Inventory-for-Resale before it becomes a drain on cash availability. Discount parts or products remaining on the shelf within nine or ten months (maybe sooner) after purchase. If the cost of the part may have increased, use the new price as the base of the discount as that will be the replacement price when new parts are ordered.
Upselling is an established and successful selling strategy, but it only works when it is employed. In other words, be sure that when buyers place orders they are advised of any inventory lowering sale underway and that those customers are asked to buy some.
Encourage customer service or inside of sales personnel to contact clients who use the overstocked or aged products or parts on sale and to advise those clients that now is a good time to stock up.
Very simple bonuses work well in these situations. More importantly, CACH will increase. You can learn more about or submit questions and comments.
BUY HERE:http://d1336m-38lsi3o2i-cjd01tu6c.hop.clickbank.net/tvitter/?tid=THE UPSELL EQUATION
Good Luck!!!
Ake,,,,,,,,,,,
It is not normal for small business owners to report that end-of-year sales were on target or much better, but available cash was less than expected. It is also not uncommon for their financial consultants to suggest that the cause of the cash shortage is associated in part to Inventory Value management.
The Inventory of a company is generally divided into two categories: Asset or Fixed Inventory and Inventory-for-Resale.
Asset or Fixed Inventory includes such products as vehicles, equipment, furniture, office equipment, real property, proprietary information as well as other valuables. The components and elements of this category of a company's Inventory usually remain constant subject to only upgrades or re-evaluations that happen from time-to-time. Those same financial consultants are particular to review the Fixed Inventory at least annually to guarantee that their business client will appreciate the optimum tax benefit. On the other hand, Inventory-for-Resale is the part of the company's Inventory that is purchased for resale as either a part or a component of a fabricated or assembled deliverable. My recommendation to small business owners is to view Resale Inventory as cash on the shelf that can't be used until it is sold rather than as a part waiting to be sold.
Inventory-for-Resale is sensitive to price changes and to time on the shelf both of which affect the Value of the part or product. When the unit cost of a Resale Inventory part or product is increased by the supplier or vendor, accordingly the value of any of the same parts or products on the shelves of the company's Resale Inventory also increases.
This principle is all too often overlooked or ignored by many small business owners. Their thinking is not to charge more because the part or product has already been bought and paid for so why charge more. Consequently, the usual result is that the product or part is sold using the original purchase cost rather than the present purchase cost. In other words, dollars are lost and cash availability lessens.
The policy of pricing a part or product for resale based on the actual purchase price has an even greater impact if the purchase price for the Inventory-for-Resale part or product is commodity driven as commodity prices can change very frequently. Petroleum, scrap metal, aluminum, and copper are among those commodities that experience frequent changes. Price increases can happen in hours. I recall some years ago when working with a rebar company in California that the price for a truck load quoted the afternoon of one day changed upward the next day when the client's truck arrived to pick up the order.
Small business owners don't ignore or overlook current values as much with commodity parts or products, but far too many will. When they do, usually many more dollars are lost and cash availability lessens even more.
Purchase price is only part of the equation however. Time on the shelf is a significant contributor to Resale Inventory Value. Selling and replacing (turns) of Resale Inventory usually translate to a greater contribution of cash. The more frequent the Inventory Turns, the greater the percent of cash to the general fund. That's percent, not quantity. A million dollar part may only need to turn once a year to contribute a great deal to the general fund whereas one hundred dollar parts could turn twelve times and not contribute as much cash. However while possible, the million dollar part scenario is a statistical outlier and consequently not a sound foundation for an inventory management policy.
However frequency and consistency are sound foundations for an inventory management policy. Frequency links to Time on the Shelf or Inventory Turns. The more frequent the Resale Inventory turns (sold and replaced), then the more cash availability increases. Twelve turns a year is fantastic. Eight to ten turns a year is very good. Anything less than six turns can be problematic for cash availability.
When a part or product is purchased and resold as either a component or single part within a month, then the part or product will have recovered its purchase cost and will have contributed the appropriate amount to the company's Fixed Costs or Overhead within a month.
Unfortunately, what happens all too often is that the part or product sold was in the Resale Inventory for many months or even one or two years or more. The consequence of this scenario is that the income generated from the sale of one or more other parts or products funded the purchase of the part or product on the shelf some time ago. Now months or one or two years later the part generates income, but it is too little too late. At the very minimum, a part or product for resale should be sold within twelve months to have the slightest chance of recovering its purchase cost and contributing to the business overhead as is expected of Resale Inventory.
Consistency equates to setting a policy and sticking with it. Consistent resale and contribution to operating cash is what a business needs from its Resale Inventory to assure expected cash availability both monthly and at year end.
What can the business owner do?
One obvious solution is to move Inventory-for-Resale before it becomes a drain on cash availability. Discount parts or products remaining on the shelf within nine or ten months (maybe sooner) after purchase. If the cost of the part may have increased, use the new price as the base of the discount as that will be the replacement price when new parts are ordered.
Upselling is an established and successful selling strategy, but it only works when it is employed. In other words, be sure that when buyers place orders they are advised of any inventory lowering sale underway and that those customers are asked to buy some.
Encourage customer service or inside of sales personnel to contact clients who use the overstocked or aged products or parts on sale and to advise those clients that now is a good time to stock up.
Very simple bonuses work well in these situations. More importantly, CACH will increase. You can learn more about or submit questions and comments.
BUY HERE:http://d1336m-38lsi3o2i-cjd01tu6c.hop.clickbank.net/tvitter/?tid=THE UPSELL EQUATION
Good Luck!!!
Ake,,,,,,,,,,,
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