Stock turns ( often called the Inventory Turnover) is one of the most commonly used measures used in stock control. What it measures is how many times you turn over your stock.
Now that you have done a stocktake, it is the perfect time to do a full review of your stock turns.
Traditionally it is calculated as
Stockturn = (Cost of Goods Sold) / (Average Inventory cost)
So say you keep a constant stock of 10 items which is your average inventory, and you sold 50 over the year. You would have a stock turn score of 5.
A score that many retailers often look at here is twelve because they tend to pay monthly, if they sell out monthly then effectively they are not paying for the stock anything under twelve they are paying to keep.
As a general rule, the higher the score of your stock turns the better. This, however, is not always true, too high a stock turn often shows that you are understocked. Say for example you have an item you could sell one a day, but you order one a week. So every week, you have sold one, so at the end of the year you have a score of 50, which is a great score but you have lost 250 sales that you could have had because you could have sold one a day and all you have sold is one a week.
How to get your stock turn scores.
Main Menu > Cash Register > Register Reports > expand Stock > select/double click the report “Show Stock Turn by Dissection and Item
Now here is the sample I produced that shows the stock turns by department.
What to do now
Take time to analyse what these scores are telling you. This will help you to identify the actions required to improve profitability and return on investment.
Now you need to analyse your stock, check each department see what is working and what is not. A score signals bad sales and that you are more stock than you realistically need at any given time. Maybe you have a pricing or quality issue. What you may have in that department a lot of obsolete stock. If so move the obsolete stock to a different department as it is not going to give you fair figures here.
A high score indicates greater profitability and good return on investment, although as I stated, it may also mean that you are not ordering enough.
Remember every figure has a story.
