By Abe Sherman, CEO BIG
Few things get my attention faster than when an owner of a jewelry store tells me they don’t have the time to work on inventory management themselves. “I don’t have the time”, or “It’s not my job” are the two most common reasons people give. A few weeks ago, while speaking with the owner of a company who falls into both of these categories, he couldn’t answer a simple question about how certain vendors were performing, or anything else about his inventory because he wasn’t paying any attention to it.
Inventory budgeting, planning and management are positions that every retailer needs to fill.
I wouldn’t suggest that it’s a job that most owners should be doing full time, but how would you know if the job is being done right, if you don’t understand how to do it yourself? Measuring Key Performance Indicators (KPI’s) is fine but all KPI’s are just results of aggregated data. Keying in on a few metrics leaves a remarkable amount of information unknown. You can improve any KPI by reducing inventory or raising your prices but what’s that doing to your overall assortment plans? (Do you even have assortment plans?)
If you own the company, it’s your responsibility to understand enough about the merchandising and inventory processes to know whether the people doing these jobs are doing them the way they should be. If you are always asking someone else to run the report for you, you’re going to miss a lot. At the very least, you should be curious about how the process works so you can be more influential about the expected outcome. I can tell you this: The owners we deal with who are also an integral part of the inventory planning and management process have the more efficient companies. Inventory is your biggest expense and your biggest investment, get into it.
The same thing goes for your financials.
For those of you who may not know, we have four Plexus performance groups where we not only benchmark inventory but also P&L and Balance Sheets. Unfortunately, many owners don’t take the time to get comfortable understanding their financials and then wonder why cash flow is a challenge. As a company, we have monthly conference calls with our CPA firm almost every month and have been doing so for years. Our accountant has been a valuable consultant, not only in understanding our business’s opportunities but in how we have changed our Chart of Accounts to better reflect the nature of our business. If you don’t have an accountant who takes an interest in your company, it may be time to find a new one… or learn this yourself. You’ll have to be a pain in the butt (my specialty) and never stop asking questions, analyzing every line item of expenses, every dollar spent on advertising and the true nature of what an “asset” is (hint: 3-year old inventory is no longer an asset except on your Balance Sheet and in your own head).
Don’t be shy, we’ll spend the time with everyone at your company who should be learning these things and if you are the owner, but are not spending any time with Balance to Buy™, send us a note and we’ll set up a call.