How to calculate your Inventory Turnover Ratio [infographic]

Posted by James Price | JPAbusiness on 29-Aug-2018 02:00:00

The first step in determining the correct stock holding for your business is to understand your current Inventory Turnover Ratio (ITR) i.e. your stock turn.

As a rule of thumb, a stock holding that represents 12 months worth of sales is the maximum needed. However, it’s very hard to generalise.

Some businesses are import oriented so need to commit to a certain level of stock to ensure their freight rate is not exorbitant and/or they have sufficient stock ordered from a single season pre-order. This may cause lumps in their stock holdings.

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Topics: Inventory, Working capital, infographic, inventory turnover ratio, Cash flow, business advice, Business advisor

Business transfer issues: Customers, Suppliers and Stock [blog]

Posted by James Price | JPAbusiness on 21-Oct-2016 03:03:00

From the JPAbusiness Strategic Business Insights blog archives

In this blog we examine the next three categories in the JPAbusiness Business Transfer ChecklistCustomers, Suppliers and Stock.

Customers

In our previous blog we talked about the financial issues related to customers, but there is a separate issue regarding customers and that is ‘relationships’.

A business may have 50 regular and loyal customers and yet 15 of those may represent 60% of the sales on a regular basis.

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Topics: Business transfer, Customers, Suppliers, Inventory

The price of poor inventory management [case study]

Posted by James Price | JPAbusiness on 12-Oct-2016 03:20:00

A couple of years ago the JPAbusiness team facilitated the sale of a strong, independent business involved in import and distribution.

It was a well-known, independent brand that had been established for well over 50 years and had solid bottom-line performance.

Unfortunately, when it came time to exit the business it soon became apparent there was too much inventory (stock on hand).

We negotiated a price for the goodwill, plant and equipment etc, based on a multiple of Business Maintainable Earnings (BME), which is essentially the cash flow of the business. Then it was time to address the stock value.

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Topics: Advice, Inventory, Selling your business

Top tips for managing inventory [blog]

Posted by James Price | JPAbusiness on 02-Sep-2016 03:00:00

When we started our eBook series one of our first eBooks focused on cash flow.

Cash Flow Management for Small to Medium-Sized Businesses was written post the GFC, because we saw cash flow management as an important success factor for our clients in managing the dynamics of their businesses in a challenging environment.

We recently completed the transaction on a business sale for a client and it served as a reminder of how important both cash flow and working capital are to the success of a business.

In particular, it reminded us how important they are to building business value and therefore, when exiting a business, receiving value from the marketplace.

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Topics: Business Value, Cash flow, Working capital, Inventory, Running your business

 
Disclaimer: The information contained in this blog is general in nature and should not be taken as personal, professional advice. Readers should make their own inquiries and obtain independent, professional advice before making any decisions, taking any action or relying on any information in this blog. 
 
 

 

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