All Things Inventory + Profit First for Retail (Ep 96)
Oct 18, 2022Let's talk about what you need to know when it comes to your inventory.
I want you to start thinking about these three things:
1. Your inventory is your biggest asset in your business and should be treated like cash.
Every time you exchange money for inventory, it's worth that amount of money until you sell it. When we start to view our inventory as cash, it does several things for us:
- It helps us become a better steward of our inventory.
- It helps us manage and track our inventory.
2. Your inventory needs to show up on your balance sheet.
Managing and tracking our inventory helps us build and grow in a sustainable way.
Your balance sheet shows all your assets and all your liabilities.
Record the cost of your inventory every time you receive it. Count the inventory against the purchase order, and enter it with the cost of what you paid for it.
Then, be sure to take a physical inventory periodically.
I suggest you take a full inventory monthly. If this feels like too much, try for quarterly or twice a year. If you take inventory less than monthly, spot check it as much as possible.
3. You should always manage any inventory damages and/or mis-ships.
You've paid cash for something and don't have the asset. Immediately contact the vendor when this happens.
When a customer brings back a damaged item, make sure you account for this.
Profit First and Inventory
As a Profit First certified coach, I love helping inventory-based businesses bring the Profit First method into their business management system.
Profit First is a cash management system (not an accounting system). It's a way to ensure that you're getting paid and that you're saving for a rainy day.
With Profit First you pull profit out of the total first, then divvy the rest up between a variety of accounts. This ensures the cash doesn't get drained.
Ready to dive deeper into your business' numbers? Join me (Ciara) in the upcoming Product to Paycheck Challenge! It's a live challenge on October 24th. We'll cover ways to get your debt and inventory under control so you can feel confident in your business.
Please always also feel free to get in touch by emailing me at [email protected].
Here's a glance at the episode:
[6:20] Ciara works through incorporating inventory into the Profit First method.
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