When you’re running a retail business, it is very easy to get caught up in the day-to-day operational issues and lose track of the bigger picture. There is always something urgent that needs to be dealt with – a customer query, a delivery that has gone missing or the next product launch to organise. As the business owner though, you need to be keeping an eye on the health and position of the business as a whole – are things going in the right direction? What do you need to be doing now to make life easier in the next six months? Which issues can be headed off before they actually arrive?
Ideally, you should set aside some time on a regular basis to look at some key reports, and by asking the questions below you can begin to understand the health of your business and what actions you need to put in place.
1. Products Reports
Review which are the best sellers. Have the best sellers changed and if so, do you know why?
What are the gross margins? Are there any products with low margins that need to be looked at in more detail – either to raise their selling price or find a way of reducing their cost?
What are the returns rates like? Do you have any products that are consistently being returned more often than others?
2. Stock Reports
Do you have adequate stock levels? Is stock building up on any particular products or selling out too quickly on others?
You need to get the balance right – not enough stock reduces your sales, but too much means you have cash tied up and may also be paying unnecessarily for warehousing costs.
3. Customer Debt Reports
Do you have any customers that owe you money? Cash flow is key, and if customers don’t pay on time it can leave you in serious trouble.
4. Sales Reports
How do sales volumes and margins compare across your different channels? Are there any channels not pulling their weight compared to the costs it takes to run them and market to those customers? Has the sales split between channels changed recently and if so, do you know why?
5. Finance Reports
Cash is key. Even a profitable business can fail if there are problems with cash flow. Make sure you have a cash flow forecast, keep it up to date and look ahead for any upcoming issues. Make sure you keep track of who needs paying when – suppliers, staff and the tax man. VAT bills come round with alarming regularity, and don’t forget the annual tax bills too.
Understand your breakeven point. This is the point at which all your overhead costs have been met and any further sales are actual profit. This tells you the minimum level of sales that needs to be achieved to keep things profitable.
Check your profit and loss report. Make sure you understand the key expenses and consider whether they are at an acceptable level. Are any unnecessary or can they be reduced?
Keeping your finger on the pulse of your business is vital, and reviewing management reports on a regular basis is the only way to know for sure what is going on. Make sure that you have up to date, accurate information and set aside time that you can use to focus on key reports and make those all-important management decisions.
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