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Business Advisory

The third cause of poor cashflow – your inventory turnover

Posted by: Glenn Sharp on

Learn how optimising your inventory turnover can alleviate cashflow challenges and enhance financial stability for your business. Explore actionable strategies to convert stock into cash faster and improve overall profitability. Learn why inventory turnover is important here.

Understanding Inventory Turnover

Calculate your inventory turnover by dividing your cost of sales by your average inventory or work in progress. While industry standards vary, it’s crucial to focus on improving your stock turn rate to free up cash.

Developing a Stocking Strategy

Establish safety stock, desired stock levels, and reorder points for each stock category to streamline inventory management and prevent overstocking.

inventory turnover concept

Utilising Inventory Management Software

Invest in software to accurately track stock levels in real-time, enabling better inventory control and decision-making.

Implementing Clear Policies

Create clear policies to identify and eliminate slow-moving stock items, reducing inventory holding costs and improving cashflow.

Addressing Stock Shrinkage

Combat stock shrinkage due to theft or damage by implementing robust security measures and regular inventory audits.

Formalising Stock Ordering Systems

Implement a formal stock ordering system to prevent stock-outs and minimise the risk of excess inventory buildup.

Seeking Professional Guidance

If you suspect that your stock levels are impacting cashflow, consult with experts to develop a tailored action plan for improving inventory turnover and unlocking cash reserves.

Call to Action

Schedule a Cashflow & Profit Improvement Meeting with us to explore how optimising your stock turn can boost cashflow and profitability for your business. Let us demonstrate the potential cash savings with a customised action plan.

Enhancing your inventory turnover is essential for optimising cashflow and driving business growth. Take proactive steps today to streamline inventory management and unlock the full potential of your financial resources.

On Wednesday 20 March from 8-9am, Sharp Accounting will be running our Cashflow Freedom Seminar. This will be held at our offices here in Ballarat. Click here to find out more and register at no cost.

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