Article 5: How to Manage Shop Stock Without Tying Up Your Cash

The short answer: the goods on your shelves are your money in another form. Too many goods, and your cash is stuck. Too few, and you lose sales. Know which goods sell fast, work out when to buy again, and check how long your goods stay on the shelf.

Why this matters

In the last article, goods on the shelves grew by 5,000, and your cash went down by the same amount. Goods only turn back into cash when you sell them.

Step 1: Know your fast and slow goods

Every shop has a few goods that sell every day, and many that sell slowly. In many shops, about one-fifth of the goods bring about four-fifths of the sales. This is a rough guide, not an exact rule. Make a list of your 10 best-selling goods. Always keep these on the shelf.

Step 2: Work out when to buy again

For each fast item, use this:

Buy again when the shelf falls to = (sold in one day × days the supplier needs) + a small extra amount

Example: you sell 6 bags of rice a day. The supplier needs 2 days to bring more. You add 4 bags in case the supplier is late. 6 × 2 + 4 = 16 bags. When your shelf falls to 16 bags, order more.

Step 3: Find the slow goods

Look for goods that have not sold in the last 60 days. Do not buy more of them. Selling them at a lower price brings your cash back. A small loss now can be better than keeping the goods for months.

Step 4: Be careful with big discounts

A supplier may offer a lower price if you buy a lot. Ask yourself:

• Can I sell all of it before it spoils or expires?
• Will I have to delay paying rent, wages or other bills to buy it?
• Is the saving bigger than the cost of having my money stuck on the shelf?

If the answer to the second question is yes, the saving may not be worth it.

Step 5: Put new goods behind old goods

Sell the older goods first. This reduces spoiled goods and goods past their date.

Step 6: Check how many days your goods stay on the shelf

Days on the shelf = goods on the shelves ÷ (cost of the goods you sold ÷ 30)

Example from the profit article: you sold goods that cost 55,000 in the month. 55,000 ÷ 30 = about 1,833 a day. Your goods on the shelves are worth 35,000. 35,000 ÷ 1,833 = about 19 days.

Write this number down each month. If it grows, more of your cash is stuck in goods. The right number is different for every shop. Fresh food sells faster than clothes or tools, so compare your number with your own last month, not with another shop.

Common mistakes

• Buying too much because of a discount.
• Never counting the shelves.
• Keeping slow goods for months.
• Running out of the goods that sell every day.
• Forgetting to write down purchases.

What comes next

In the next Article 6, we answer a question many shop owners ask: How much profit is normal for a small shop?

This article is for general learning. It is not personal financial advice.

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