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Cash Flow: The Blood Flow In The Body Of Business
December 4, 2007

If a retail business is a body, then the blood stream is the cash flow.  What, then, would be represented by cholesterol?  Easy... inventory.

There is good cholesterol, or product that sells well, and bad cholesterol, that is, product that sits.  Like cholesterol, if a store has too much bad product build-up, the result is decreased cash flow.  I have noticed that one prominent source of this bad build-up is special sale pricing.  A specific example of this would be a great deal that we got several months ago on a certain set of furniture.  This set, while it does sell, is taking up a great deal of our warehouse space... thus, build-up.  I suppose because this is a moving product that this is "good cholesterol" but too much of a good thing is still too much.

So, in staying with the body metaphor, what would be the cholesterol reducing remedy?  Reducing your buying, like reducing your cholesterol intake, works best when accompanied by a full "work out" program therefore is not the easy answer.  No, I'd say there is a multi-faceted solution to your inventory cholesterol.  Yes, you have to reduce the amount of buying at one time but be prepared to purchase from each company more often to insure that you have enough "good cholesterol" or product on-hand.  Second, if it's sitting like arterial plaque either in your warehouse or on your floor, mark it down.  If that doesn't work, well, fire all of your high-paid employees and start from scratch (this is only for emergencies).  This strategy is the proverbial defibrillator.  "Clear!!!"

Posted by Kelly Nelson on December 4, 2007 | Comments (1)