One of the most frequently asked questions from salon owners is “What is the best way to control stock?”
So Many Ways to Manage Stock
Over the years I have witnessed everything from limiting the amount of stock (value) to a strict percentage of the previous month's turnover to popping out to buy a box of colour whenever a client makes an appointment for a colour service, to investing in so much stock (just in case you need it) that you're not able to park your car in your garage because it's full of stock!
Symptoms of poor stock management - you keep running out of popular items and/or not having cash in the bank to buy stock because you are overstocked and all your cash-flow is sitting on your shelves.
Guidelines for effective stock management:
• MODEL LEVEL - Give every stock item a model level.
The model level is based on current sales or usage, i.e. how many of each item you need to cover you for say a month. That figure is your model level. Do the same exercise for every item you use in your business.
• REORDER LEVEL – When to reorder?
This is the point when you should reorder items so as to not run out of stock when it’s needed.
For example, if you use 6 of an item per month that would be your model level. To ensure you don’t run out of stock, you would probably make three your reorder level.
• STOCK TAKES - Take stock regularly, at least weekly.
If you don't you will not be able to control your stock effectively.
• STOCK REPORTS – Reports tell you how your stock is moving.
If your software system has them, there are two reports that should be checked on a regular basis.
The first is stock movement - This shows you the movement of stock, i.e. what you've bought, what you've sold and what you have used in your business, between periods of time (normally stock takes). This will guide you as to whether you need to increase or decrease your model levels.
The second is forward cover report - This report is a life saver to check, based on your current stock on hand, how long each item will last, based on current sales/usage.
Effective stock control can save you up to 20% of your cost of sales and, considering that can amount to 25% of your turnover, it makes sense to see the saving go straight to your profit line.
If you need any further advice on stock management, call Terry Miles on 0836500952 or email terry@mysalonsoftware.co.za
– Terry Miles, MD MySalon Software
Email: info@mysalonsoftware.co.za