CONTROL AND FEEDBACK

To make your plan work you need feedback. For example a year-end profit and loss (income) statement shows whether your business made a profit or took a loss for the past 12 months.Don't wait 12 months for the score. To keep your plan on target you need readings at frequent intervals. An income statement compiled at the end of each month or at the end of each quarter is one common type of feedback.

 

You must also set up management controls that help you ensure that the right things are done each day and week. You as the owner-manager cannot do all the work. You must delegate work responsibility and authority. All record-keeping systems should be set up before the store opens. After you're in business it is too late.The control system you set up should give you information about stock sales receipts and disbursements. The simpler the accounting control system the better. Its purpose is to give you current useful information and help you expose trouble spots. Outside advisers such as accountants can help.

 

The purpose of controlling stock is to provide maximum service to your customers. Your aim should be to achieve a high turnover rate on your inventory. The fewer dollars you tie up in stock the better. In a small store stock control helps the owner-manager offer a balanced assortment and determine stock to be ordered on the basis of what is on hand what is on order and what has been sold.When setting inventory controls keep in mind that in addition to the cost of the stock there are also the costs of purchasing receiving and storing stock and the cost of keeping stock control records.

 

Your stock control system should enable you to determine what needs to be ordered on the basis of what is on hand what is on order and what has been sold. Some trade associations and suppliers provide systems to members and customers. Otherwise your accountant can set up a system that is best for your business. Inventory control is based on either a perpetual or a periodic method of accounting involving cost considerations as well as stock control.When you have chosen the system you will use to control stock estimate its cost. You may not need an extensive (and expensive) control system if you do not need the detailed information such a system collects. The system must justify its cost or you will waste money and time on a useless effort.

 

Many stores (e.g. bookstores shoe stores and clothing stores) use computerized software systems to control inventory. A computerized inventory system is especially helpful if you must maintain a large variety of products as in a bookstore a liquor store or a shoe store. A computerized system allows you to avoid overstocking items that do not sell in large quantities by providing detailed reports on sales and stock turnover. Speak to your accountant about the feasibility and cost of using a computerized inventory system or visit your local computer store to see what inventory systems are available. The best system usually will be one designed for your line of business.