Financial Guide for SMEs - SME Corporation Malaysia

Financial Guide for SMEsChecklist for Managing InventoryList slowmoving,old andexcessinventoryUpdateinventoryrecordsMake a list of slow-moving, old and excess inventory itemsand develop an action plan to move this inventoryimmediately, even if it is at lower price than the cost of theitem. This will generate cash to invest in new inventory thatwill move more quickly and make available display space forfaster moving inventory.Update your inventory records with the current levels andthen implement a policy to track all movements of inventory.This will help to ensure that inventory is re-ordered only whenneeded, and will highlight any theft or fraud that may occur.2. Buying PolicyActionUnderstandwhat is “core”inventoryDescriptionIdentify inventory that you simply must never run out of in orderto maintain sales momentum and ensure that customers wouldnot be disappointed over the basic products.Tighten thebuying ofinventoryNegotiatewithsuppliersBeware ofdiscountsofferedKnow the volume sales per inventory item. This will help youto buy the right amount. Carrying too little inventory maydiscourage customers, as you may not be able to satisfy theirneeds immediately, and carrying too much inventory meansyou are tying up cash that could be put to better use.Negotiate deals with suppliers, but avoid volume-baseddiscounts. When money is tight, there is no point investing innext month’s inventory without good reason. Instead of volumedicounts, try to negotiate discounts for prompt settlement(unless your cash position is poor) or negotiate for smaller andmore frequent deliveries from your suppliers to improve yourcash fl ow.Do not let discount prices determine your inventory-buyingdecisions. Buy inventory that you can sell at a profi t in areasonable time frame.50Chapter 2-5 p22-65 Eng.indd 508/15/11 5:01:57 PM