How quickly stock becomes money.
WHAT STOCK TURNOVER MEASURES
How many times you sell through your stock in a period.
WHY IT MATTERS
Faster turnover means less cash tied up for the same sales.
HOW TO CALCULATE IT ROUGHLY
Cost of goods sold, divided by average stock value.
WHAT A LOW FIGURE INDICATES
Too much stock, the wrong stock, or slow sales.
WHAT TO DO ABOUT IT
Identify what is not moving, and clear it.
WHAT CLEARING MEANS
Reducing the price until it sells.
WHY ACCEPT THE LOSS
The cash is worth more than the stock, and it frees space.
WHAT TO AVOID
Holding stock hoping it will eventually sell at full price.
WHY
It rarely does, and it deteriorates.
WHAT TO CALCULATE
Days of stock held, by category.
WHAT THAT TELLS YOU
Where cash is concentrated.
WHAT TO REDUCE FIRST
The slowest categories.
WHAT ORDERING MORE FREQUENTLY PROVIDES
Less cash tied up Fresher stock Less risk of obsolescence
WHAT IT COSTS
More delivery charges and more administration.
WHAT TO BALANCE
Those against the cash benefit.
WHAT TO ESTABLISH
Reorder points for key items.
WHAT A REORDER POINT IS
The level at which you order, allowing for delivery time.
HOW TO SET IT
Sales rate multiplied by delivery time, plus a buffer.
WHAT THAT PREVENTS
Running out of your best sellers.
