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www.IndependentRetailer.com MANAGEMENT
Improving Cash Flow continued from page 102
essential to positive cash flow. Understanding gross margin return on investment (GMROI), which blends average inven- tory and gross margin, would be very useful here. 4) Raise maintained
markup. Increasing maintained markup can be accomplished by either raising initial markup or by reducing markdowns. Since this is an average not all stores need this high of a markup, while others may need more. Good retailers maximize IMU wherever possible. This is the reward for diligent buying and good negotiating.
In today’s
retail environment, all retail- ers need to strategically avail themselves to opportunistic pric- ing (buying off-price), whenever possible, in order to maximize maintained markup. 5) Properly timed deliver-
ies. The timing of merchandise deliveries is critical to the opti- mization of cash fl ow. This point is closely linked with all points previously covered. What sells fastest in your store, new mer- chandise that arrived just ahead of the new season or last sea- son’s leftovers that you couldn’t even get rid of on sale? If vendor terms aren’t prearranged, some stores end up paying for goods months before they have had an opportunity to sell them in some
cases. I have also seen exam- ples of stock levels in seasonal categories (i.e. sandals or win- ter footwear) that are actually higher in the months following the season than they were dur- ing the season, due to accepting late deliveries. Since inventory is most often
a retailer’s single largest asset, more time and resources should be devoted to monitoring this area. Accurate sales and inven- tory forecasting is essential to maintain and strengthen cash fl ow. Inventory related costs can take over half of a retailer’s annual budget, and operating expenses eat up another 40 percent, on average. In other
continued on page 108
104 April 2012
INDEPENDENTRETAILER
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