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At Finnies we can provide businesses 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:
Above all, it ties up cash.
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.
Here are some suggestions for reducing stock costs:
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 looking for support and assistance from experienced accountants and business advisers, contact Finnies.
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