Money in a stock-heavy business.
WHY IT IS DIFFICULT
Stock is paid for before it sells, and much of it sells slowly.
WHAT TO CALCULATE
How long stock sits before selling, by category.
WHAT SLOW CATEGORIES MEAN
Cash committed for long periods, with expiry risk attached.
WHAT TO DO ABOUT THEM
Hold less, and order more frequently.
WHAT TO NEGOTIATE WITH SUPPLIERS
Payment terms Return of near-expiry stock Delivery frequency
WHY DELIVERY FREQUENCY MATTERS
Frequent small deliveries reduce both cash tied up and expiry risk.
WHAT TO AVOID
Bulk purchases to obtain a discount.
WHY
The discount is usually smaller than the cash cost and the expiry risk.
WHAT TO CALCULATE BEFORE ANY BULK ORDER
Whether you will sell it before it expires.
WHAT TO TRACK
Stock value against monthly sales.
WHAT A HIGH RATIO INDICATES
Too much stock.
WHAT TO DO
Identify the slow lines and reduce them.
WHAT TO ESTABLISH ABOUT CREDIT TO CUSTOMERS
Whether you offer it, and to whom.
WHY IT MATTERS
Credit in pharmacy is common and frequently uncollected.
WHAT TO RECORD
Every credit extended, and pursue it.
WHAT TO ESTABLISH ABOUT INSTITUTIONAL CUSTOMERS
Their payment behaviour, before supplying on account.
WHAT TO MONITOR
Outstanding balances, by customer and age.
WHAT TO REVIEW MONTHLY
Sales, margin, stock value and write-offs.
