Managing and Controlling Debtors Creditors
Autor: csmithh • February 15, 2013 • Case Study • 1,271 Words (6 Pages) • 632 Views
It is important for business owner’s to constantly monitor the inventory held by a trading business since the success or failure of a business is often decided by the decision-making of management in relation to its inventory. Inventory is the most valuable asset reported in the balance sheet. If inventory is not managed effectively, the overall performance of a trading firm will suffer and so will the returns to the owner in terms of profit. As the success of a trading firm is based on the buying and selling of goods, the management and control of inventory is crucial to this objective.
Identifying and removing slow-moving lines:
Stock cards must be regularly reviewed and slow moving lines identified. Slow moving lines have potential to ruin a trading business, as once the good has been paid for, it must be sold to generate cash flow for the business. The definition of slow-moving inventory relies heavily on the nature of the goods being sold. Some inventory may be slow moving in comparison with other goods available for sale. However these slower selling items may also be highly profitable.
Monitoring seasonal products:
Towards the end of the ‘season’, stock that is subject to seasonal demand must be run down to a very low level or cleared all together. If the firm is left with stock items that cannot be sold for another 12 months (if at all), these items will become dead stock. Seasonal stock includes beach wear, woollen clothing, heaters etc.
Monitoring products subject to technological obsolescence:
Customers have a desire to have the latest products, and even cheaper alternatives may not persuade them to buy older models. Therefore management is such industries must take care not over-commit to inventory purchases. It must keep up-to-date of the latest trends in product development.
Introducing complementary products:
The firm will need to consider what products it could sell to complement the products already available. An increased range of inventory may attract additional customers and also improve the chances of selling the established lines of stock. For example a menswear store will usually sell belts and ties as well as shirts and trousers.
Changing with times:
Regardless of the nature of the inventory being sold by a trading firm, management must always be prepared to change. Markets change, competitors change and customers change. A top seller one year may become a slow mover in another year. Management must always be ready and willing to react to change. Those business owners who refuse to change will often find themselves losing their place in the market and they may pay the ultimate price when