Saturday, February 7, 2009


It is a valuable CFO Service to solve inventory problems.

If you are a retail business there is only one thing that will bring you down real fast and that is too much inventory. In this current economic environment the cost of carrying inventory is even greater because with many banks not lending, capital is hard to get. If you overbought inventory identify the inventory that is slowest moving and reposition it on the sales floor and price it to move. You may also want to take a look at the signage in the store to make sure you are communicating clearly with your customers as to what deals you have. You may want to package items together as customers always like package deals. Yes, your profit margins are going to suffer, but with the cash you get from the sale of the slow moving goods you can use that cash to buy inventory that sells and therefore your inventory will turn quicker getting you into a profit position quicker.

During this process you may have to work with your inventory suppliers. Once again identify the slower moving merchandise and go to those suppliers to ask for extended dating. Sometimes certain styles and types of inventory that you bought may not be selling in your market, but may be selling in other markets. If that is the case it is possible that the supplier will buy back the inventory or replace it with faster moving goods and the supplier can sell your slow moving inventory in the other market where it is selling. The key to these supplier strategies is keeping the lines of communication open with your suppliers and the supplier’s sales rep.

By the way I did not forget that suppliers get angry when you discount their product. This is where constant communication with your suppliers and their sales reps really helps. If you are identifying slow moving merchandise quickly enough then it is important to communicate with the supplier what your intentions are to alleviate the slow moving problem as soon as possible giving the supplier time to react and time to work with you to resolve the problem. The CFO who has experience in business ownership is going to be able to understand the business ramifications as well as the financial ramifications.

I know, it is not easy, but the critical component of the entire process is identifying slow moving goods as soon as possible, communicate with your supplier and cut your losses!