Case Study: Stock Management

Anyone with stock in their business knows it’s a cash killer and also knows it’s critical to making money.  Quite often it’s the biggest asset in the business and quite often it’s the hardest asset to sell when it’s time to sell the business. 


What are the issues?


Quite simply stock needs to managed.  It’s the biggest asset in a business and when asked, under 5% of businesses have a formal stock management process. 


Biggest asset, biggest cash killer, no management = bad business practices. 


By working with Clear Vision Accountancy Group under the CFO Now program, we can help you develop and put in place an effective Stock Management Process.  As part of this process, we can put in place Key Performance Indicators that allows you to manage your stock on a weekly basis (depending on your needs – sometimes monthly is more appropriate).  The best part is, you take action much more quickly when business isn’t as effective as expected. 


That helps cashflow.


Here’s an example of work we did with a client. 


Let’s call them Bill and Mary.  While working with them under the CFO Now process, we found they held onto their stock as average of 120 days. 


That is, it took an average of 120 days from the stock item hitting the store to being converted into cash – that’s a long long time.  We put some actions into place and because Mary was keen to make a difference in their business, those actions identified some slow moving stock. 


In fact they had 9 widgets on the shelf but only sold 1 in 12 months.  Once Mary knew this and knew which stock wasn’t moving, out it went, converted to cash (approximately $34k) and this was used to buy more faster moving stock.