Inventory turnover is a technique used to check the performance of an inventory in the company. It also indicates the quality of the products stored and the quantity sold in a period of time. The data is also used to evaluate the financial health of the company.
Monitoring inventory turnover helps you better manage your company's merchandise according to sales frequency. It also promotes more effective management, focusing on reducing costs and increasing profitability. In this post, we will clarify this concept and explain how to calculate stock turnover.
Understanding what inventory turnover is
Parameter used to check the performance of a company's stock. It also indicates the quality of the products stored and the quantity sold over a period of time. The data is also used to assess the financial health of the company.
The calculations help to identify the number of times per spain whatsapp data year that merchandise turnover occurs and the average time that items remain idle. The manager can assess the scenario and create strategies to reduce the time between storing the raw material, manufacturing it, and delivering it to the end customer.
Inventory Turnover: Calculation
To understand inventory turnover, let's explain its formula better. To do this, you need to know your average inventory and the total number of sales. See the example:
Average stock: 500 units;
Total sales: 4,000 units per year,
Calculation: 4,000/500 = 8 turns per year.
When the company sells several products, it is ideal to perform the calculation using the purchase values. For example:
Stock*: US$ 5,000.00;
Sales volume per year*: US$ 25,000.00,
Calculation: 25,000/5,000 = 5 turns per year.
*Considering the supplier's purchase value, not the final sale.
If the number obtained was less than 1 in the two examples above, this would indicate that some products are still in stock. There is also a calculation that can help you understand the inventory turnover ratio . Follow:
Number of days in the year: 365;
Number of spins: 5,
Calculation: 365/5 = 73.
The average time to replenish stock is therefore 73 days. Knowing these numbers offers the manager many advantages:
Ability to understand product rotation;
Adequate knowledge to create alternatives that prevent elements from becoming obsolete,
Search for methodologies to reduce storage costs.
How to control stock?
Inventory control is important to prevent financial and product losses. Tracking and analyzing materials helps ensure that operations run smoothly. Some measures can help with this control:
Manage inventory
High or low levels of product stock can become a problem. Stock coverage needs to be assessed to determine whether it will be possible to meet future demands.
With inventory management, it is easier to avoid expenses related to the maintenance of items. Knowing the stock turnover , it is possible to limit the number of items that are under-produced. Reviewing flow data according to outputs and inputs can avoid failures.
Sales tracking
The manager needs to identify the products that have the most sales, as well as the periods of the year when sales increase. This practice helps to maintain more efficient stock control, depending on the needs of the merchandise.
To do this, it is essential to know the actual transaction data and to monitor them frequently. Researching consumer trends also prevents the company from investing in an item that does not interest the customer.
Increase turnover
Purchasing products from suppliers more frequently than storing many items in stock prevents running out of cash and losing merchandise. It is essential to know the company's numbers, supplier delivery times, average production time and sales frequency.
All of this will help you better plan your stock capacity, as well as increase your stock turnover. If you already have a lot of items in stock, running a campaign can help with product turnover.