The Search for More Cash
Part Three: Further ideas on inventory management and how to sell off excess inventory
July 2007 By Robert Ain
I want to fly but I can’t even swim.
—Ray Davies
So you want to fly and get more cash out of your business, but you can’t even swim? Well, let’s continue with Part Three in our series of articles on getting more cash out of your business and you might not only be swimming, but flying as well.
Two months ago, we discussed your balance sheet, current assets and the benefits of having cash. We asked: If your accounts receivable and cash management currently are in good shape, can you find other areas you can tap to raise cash and take advantage of opportunities that require money?
Last month, we talked about one such area: inventory. Decreasing inventory or increasing inventory turns is a good way to transform your current assets from inventory to cash.
This month, we’ll explore further ideas on inventory management and how to sell excess inventory. To wit:
• Distributors can be your friend. If you’re buying everything directly from the factory, you’re probably not buying efficiently. Develop a relationship with a local distributor. Distributors give discounts to their best customers, and the margin you should be able to realize is probably close to or equal to your current direct margin.
What do you need in a distributor? Look for these five characteristics in a distributor: one that always has products in stock; one that takes back defectives for exchange or credit; one that gives credit; one that has sophisticated structure and provides information easily to its customers; and one that provides great training.
By buying JIT (Just in Time) from a distributor, you’ll significantly lower your inventory investment. Of course, not all lines are available through distribution, but your day-to-day needs certainly are readily satisfied; connectors, wire, in-wall speakers and so on are all available through numerous distributors.
• Use the web to sell off excess inventory you don’t need. If you don’t have a web site, start one immediately; customers are looking there to get information and purchase products. Make the site clear and understandable. (And while you’re at it, explain differences in products! I was recently doing research on speaker companies and two web sites were just terrible in providing information. One site had two different models of in-wall speakers and I couldn’t tell which the better product was nor which was the more expensive speaker since no prices were given. “Good, better, best” always works and there are elegant ways of saying which is the best.)
—Ray Davies
So you want to fly and get more cash out of your business, but you can’t even swim? Well, let’s continue with Part Three in our series of articles on getting more cash out of your business and you might not only be swimming, but flying as well.
Two months ago, we discussed your balance sheet, current assets and the benefits of having cash. We asked: If your accounts receivable and cash management currently are in good shape, can you find other areas you can tap to raise cash and take advantage of opportunities that require money?
Last month, we talked about one such area: inventory. Decreasing inventory or increasing inventory turns is a good way to transform your current assets from inventory to cash.
This month, we’ll explore further ideas on inventory management and how to sell excess inventory. To wit:
• Distributors can be your friend. If you’re buying everything directly from the factory, you’re probably not buying efficiently. Develop a relationship with a local distributor. Distributors give discounts to their best customers, and the margin you should be able to realize is probably close to or equal to your current direct margin.
What do you need in a distributor? Look for these five characteristics in a distributor: one that always has products in stock; one that takes back defectives for exchange or credit; one that gives credit; one that has sophisticated structure and provides information easily to its customers; and one that provides great training.
By buying JIT (Just in Time) from a distributor, you’ll significantly lower your inventory investment. Of course, not all lines are available through distribution, but your day-to-day needs certainly are readily satisfied; connectors, wire, in-wall speakers and so on are all available through numerous distributors.
• Use the web to sell off excess inventory you don’t need. If you don’t have a web site, start one immediately; customers are looking there to get information and purchase products. Make the site clear and understandable. (And while you’re at it, explain differences in products! I was recently doing research on speaker companies and two web sites were just terrible in providing information. One site had two different models of in-wall speakers and I couldn’t tell which the better product was nor which was the more expensive speaker since no prices were given. “Good, better, best” always works and there are elegant ways of saying which is the best.)
