1 reason retail performance manager uses the retail inventory method of accounting is as it’s quick and efficient to reach a present value of your stock. However, it’s neither accurate or adequate. That is why it’s important for retailers to […]
1 reason retail performance manager uses the retail inventory method of accounting is as it’s quick and efficient to reach a present value of your stock. However, it’s neither accurate or adequate. That is why it’s important for retailers to execute a periodic physical inventory count. How frequently that count is done is completely up to each retail company, but it needs to be performed two to four times a year is better. Retailers have to have the ability to react to the changing business landscape, change and adapt, and pivot as frequently as possible is the new standard.
What’s the Retail Inventory Method?
The retail inventory method is based on the cost of product and how much you record your products for at retail. Accountants usually begin with the cost of product and divide it by the retail price to find out the cost-to-retail percentage. Next, you calculate the cost of goods offered for sale. Then you figure out the cost of sales by multiplying the cost-to-retail percent and earnings amount for the period. Ultimately, you compute the ending stock by subtracting the cost of sales from the cost of goods offered for sale.
Why the Retail Inventory Method is Not Always Accurate
While there are advantages to using this accounting method, there are only a few challenges and issues to reckon with. Here are three issues with the retail inventory method that retail operations supervisors should be aware of in the start:
1. It only works if you’ve got a consistent markup across all products in your inventory. For those who have products with exceptionally different markup proportions –and many retailers dothen your estimated ending inventory for the period might be off target radically. The more diversity you have in your stock markup, the more frequently you need to perform physical inventory; that is time consuming as you know.
2. It is based on historical assumptions which might not always be true. If your markup is seasonal or different from what it had been in the start of your inventory cycle, then the ending balance will be skewed. If you have recently changed your mark, you might conduct a physical inventory to get going on another cycle on the right path.
3. If an acquired retail performance is purchased by a larger entity with huge quantities of stock that bares a considerable gap in markup percent, it is going to skew the end balance of the acquiring operation. This can be avoided by working through the procedure separately for each thing.
Is there a better way to get around these blind spots and common pitfalls? You bet!
The best way to Scale-up with ConnectPOS retail inventory management software
1. Describe the trend: if you would like to sell the ideal product to the perfect customer, you must identify beforehand the shifting consumer behaviours before they happen, otherwise, you won’t have the ability to stock the perfect merchandise at the perfect time; so keep your eye on the fashion business, current consumer trend on the marketplace and shifting business models.
2. Effective budgeting and planning: Planning your retail budget is essential in retail industry. You need to operate your company in your budget , but you should also fulfill the pent demand of your clients. Once you determined which products to purchase, you want to contact the vendors and put the orders accordingly. A centralized retail system which makes it possible to do that more effectively will benefit your retail shop for quite a very long time and your business resilience on the way.
3. Tracking the item: It starts at the time of ordering. As soon as you purchase a purchase for bulk product, you will need to discover where that item is from the supply-chain. And you need also to follow it all the way to your warehouse. Thereafter you want to monitor it from the warehouse to your shops, in the client’s hands or his/her doorstep.
4. Allocation of Products: it is important to allocate the ideal amount of each product to each point of sale location. Merchants that sell well in 1 location may not sell whatsoever in a different geographical location or zone. Recognizing retail business cycles, audience thinking and changing buying patterns of consumers at every retail store are crucial precautions and barometers to keep on the watch list of driving variables.
5. Replenishment: you need to identify the perfect time to replenish your supply of each item, you take and re-order at the ideal time. You want a list management software system that’s agile-ready and that may help you personalize your replenishment cycle to fulfill your demands.
Whether you are an apparel, jewelry, footwear, sporting goods, department store, home decor or specialty retailer, ConnectPOS inventory software offers the precision required to benefit you as a merchant and the agility to deal with peculiar character of your specific vertical or niche market.
ConnectPOS’s integrated accounting solution will surely help you manage your retail operations inventory and accounting purposes while keeping your books pristine and optimum for different operations.
►►► ConnectPOS is a cloud-based POS software compatible with multiple platforms including Magento, Shopify & Shopify Plus, and BigCommerce.