Stock answers

Inefficient stock management can be one of the biggest drains on profitability.

At MRO Accounts we can provide businesses in the Hemel Hempstead area with assistance and advice on a wide range of business issues. Here are some thoughts on stock control...

If not managed efficiently, stock can be one of the biggest drains on profitability for a business.

Holding stock incurs costs in:

  • Warehousing
  • Personnel
  • Transportation
  • Insurance

Above all, it ties up cash.

Ideal solution

In an ideal world, every business would have no stock at all but would operate entirely on a well-tuned just-in-time (JIT) system with materials and parts arriving in the order and quantities in which they are needed for the manufacturing or assembly process.

But we do not live in an ideal world, and many small and medium-sized businesses do not have the resources or the sophistication to implement JIT. So if you must carry stock you need to be constantly on the lookout for ways to minimise the haemorrhaging it can cause to your hard-earned profits.

Reducing stock costs

Here are some suggestions for reducing stock costs:

  • Identify those materials that contribute the least to product variety and differentiation - that is, those that are commonly used in numerous different products - and use them as widely as possible
  • Check the quality and accuracy of goods received from suppliers. If you only spot the poor quality at the end of the process, it is too late...
  • …However, if you work closely with your suppliers and build up a relationship of trust, you may be able to cut down on the time spent checking the materials that come in
  • Wherever possible, reduce the lead time for ordering materials, but take care not to unwittingly create hold-ups in production
  • Constantly review sales trends and cross-reference them with stock requirements
  • Make sure delivery schedules are neatly choreographed with production - try to avoid holding any more finished products than you really have to.
  • Try to negotiate discounts on virtually everything that you buy and then negotiate terms for payments and interest rates.

Caution

Finally, a note of caution. Although it is generally best to keep stock as low as possible to avoid tying up capital, this might not always be the case if there are really significant bulk discounts available.  Also, if you decide to make changes to your stock levels or procedures, be sure to do so within the context of the business as a whole: never make stock decisions in isolation.

If you are in the Hemel Hempstead area and are looking for support and assistance from experienced accountants and business advisers, contact MRO Accounts.

What our clients say:

“Working with Melody is an absolute pleasure. She handled my accounts with complete unflappable professionalism and navigated her way thought the HMRC hoops. In my first year of business I was employed, unemployed and self-employed, all within 12 months - not a simple situation! And she does it all with a smile :)”

Thank you Mel, you let me get on with my job confident that my accounts are in safe hands

Dee Fagg, 3D-VA

“I have known Mel for 6 months and in that time she has managed to totally organise my accounts and make me company be more efficient, what used to take me a long time, takes her a very short time, she makes it seem easy and is able to make me understand what I should be doing and the easiest way of doing it! My accounting life is now so easy not a time to be dreaded!! Thank you Mel!”

Claire Lee, Venue Queen Ltd

“MRO Accounts have been very helpful in the early stages of getting my business started, with clear advice and guidance that has really helped me sort my finances out. MRO Accounts have always been very prompt and speedy in dealing with any of my queries, which is very important to me and gives me every confidence that I am dealing with professionals. I wouldn't hesitate to recommend their services.”

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