These are challenging times. Businesses, large and small, are struggling to stay alive. Owners are concerned about cash flow and lack of revenue. Inventory may be starting to back up, bringing additional costs into the equation. It can be really overwhelming, to say the least! Based on our years of inventory planning experience, we would like to provide our readers with a few helpful tips for weathering these uncertain times.
- Examine your Product Assortment. Categorize your products according to their selling attributes. Rank your products within the categories by Revenue and Profitability. Eliminate the duplication in your assortment. Liquidate the poor performers. Remember the 80/20 rule. By reducing your underperforming inventory, you will free up cash that can be invested in more profitable merchandise and other company initiatives.
- Analyze your accounts and channels of distribution. Are some accounts more profitable than others? If your business is “nonessential”, the majority of your sales have probably shifted online. Focus on the accounts and channels that are the most profitable now. Be creative in your marketing messages. It is not business as usual, and all companies must adapt.
- Devise a plan for your business that includes measurable goals and a system to evaluate results realistically. For companies that carry inventory, an Open to Buy Plan is essential. An Open to Buy is a financial budgeting tool that companies use to manage inventory and make the best use of their purchasing dollars. It provides a financial roadmap. Companies can use the Open to Buy to project their revenue and inventory purchases, therefore having a better understanding of their cash flow. Sales projections (and actuals once they are realized), the costs of goods sold and inventory levels are laid out by month. This information is tracked against the company sales and profit goals, providing the company with a roadmap to follow to attain these goals. The inventory levels necessary to meet these goals are laid out and the company can manage to optimal inventory levels as actual sales and profits are recorded.
- Consider a forecasting system if you currently don’t have one. A forecasting platform brings all of your company’s vital sales and inventory data together in one location, so that analysis and forecasting is efficient and accurate. It provides documentation of your original plan and will give you the vision into what your future inventory position will be using the current sales trends. By having all the vendor and factory information at your fingertips, you can make adjustments if factories close or production is delayed. The system will alert you to opportunities and liabilities which require action, prioritizing the items which will affect your business the most.
Cash flow is a top concern for businesses in these difficult times. We hope these tips have provided you with some ideas on how to increase cash flow. For more helpful insights about how forecasting can help increase cash flow in uncertain times, contact the industry experts at SAFIO Solutions, or visit our website at: