To increase your profits, learn about the functionality in your point of sale software to improve your inventory management and get the most bang for your buck.
In today’s highly competitive retail environment, your business must be organized enough to adapt to changes in the market. One of the most powerful tools for your business is a point of sale software that brings each area of your business together. These software packages vary greatly in their functionality, yet have many things in common, such as organizing vendor and product information.
Utilizing all of the “bells-and-whistles” of your point of sale software can organize and automate many of your daily responsibilities. It’s designed to improve the customer experience and increase productivity. Also, knowing all of the functions you don’t need can help you reassess the software package that’s right for your company.
Knowing What You Don’t Know
You already know how much your point of sale software has organized your business, but you may not know the functions that can improve your inventory management and sales. Statistics on software utilization suggest that 7% to 45% of software functions are never used. If we take the midpoint of these statistics, you are probably not using a quarter of the functions offered by your point of sale.
After being trained on your point of sale software, you were probably very confident in processing sales and enter receivables, or complex transactions like customer returns. The next step was running reports on sales and inventory. These are the basics for running your business, but to increase efficiency and profit margins, you should be using the software in ways that you may have forgotten during the initial tutorials.
Below is a list of 7 tips that can help you automate your operations and increase productivity—all from your point of sale software. But, to get the most of your software, you’ll need to do a little more than dig deeper into the manual to learn about those unused functions. You’ll need to work with your employees and suppliers to streamline tasks and improve upon your efficiency.
1. Inventory Alerts
Using inventory alerts goes beyond missing an important order for popular products. It’s a great way to manage your inventory levels to ensure that you have enough to cover demand, but not too much that it ties up your cash.
Setting a minimum level depends upon knowing when stock levels are low. To calculate the trigger for an inventory alert, you should include delivery schedules and turnover rates. You can also study historical sales reports to learn about buying trends and customer demand.
With a manual process in place, one where you physically count stock on the shelves or try to follow the reports, you may forget to create a purchase order. Another problem arises when you are pulled in many directions throughout the day. Those interruptions during important tasks are where mistakes can be made. This is detrimental to your inventory management, especially if your company has hundreds or thousands of different SKUS.
2. Supplier Relationships.
Did you know that your point of sale system can help you manage your supplier relationships? You can look at the most recent per item costs and average costs, also the frequency of your purchases. You’ll have a very good idea of how much your next purchase order should be for. Before you send your purchase order, check to make sure the pricing and quantity match what was negotiated with your supplier. Then, you can use this data to negotiate future pricing.
This is a good time to investigate supplier discounts or competitor pricing. Your suppliers are in a highly competitive environment and want to earn your business. Use this to your advantage when reordering stock.
3. Building an Inventory Plan
Now that you have your inventory alerts in place and the best pricing you can get, you need to understand how your inventory supports future sales and delivers consistent growth. This plan serves as a major component in your cash flow plan, because inventory is the largest expense for any retailer. This plan is also a general overview and doesn’t tell you exactly what you need to buy. Data collected by your point of sale software can help you.
Frequency is important to avoid outdated forecasts. First, you need to determine the inventory received and ending inventory (by dollar amounts) for every month. From this information, you can forecast the number of receivables for the next month, plus sales and markdowns, to get to the planned ending inventory for that month. The difference between the two is your sales for the month.
An inventory plan avoids empty shelves and poorly planned sales or markdowns that negatively affect revenue and profits. You can also make adjustments, such as increase inventory to increase revenue.
4. Employee Training
Your employees have frequent and direct contact with customers and suppliers. And, they received the same training as you have on your point of sale software, but probably don’t use it the same way. Inconsistent or missing data from purchases and sales can skew valuable reports used in forecasting.
Your point of sale software is the primary source of your business data, so tailor their training sessions with brief instruction designed to meet your goals. Even if you’re strapped for time and cash, this is an important way to ensure quality of service and engage with your staff to improve morale and productivity.
5. Research Market Trends
This is your business and you love it, which is why you love to read all about the latest trends and fashions. That’s great! Continue to do it. There are a lot of articles on training your employees and how to improve the customer experience. There are also a lot of interesting articles on seasonal buying trends. This enables you to understand more about your specific industry and adjust your inventory according to these patterns to take advantage of the seller’s market.
A great example of seasonal buying is the release of Christmas themed movies during the holidays. Each year, before Thanksgiving, popular movies that have been around for decades, such as Christmas Story and It’s a Wonderful Life, are available for purchase or to rent at new movie pricing. Look for the same movie in July, and it’s on the discount shelf.
Another thing you can research is the industry average annual profit margins. You will probably need to pay for many of these reports, but they are worth it, because you can compare your business with your competition. Your point of sale software can provide you with historical data to make comparisons between the two. After reviewing them, you should gain some insight into the adjustments needed for your inventory or product offerings to compete better or grow your business.
How are you going to know the functions in your point of sale that you’re missing out on? You can spend hours trying to understand many of the reporting functions and integrated tasks or make phone call to customer service. The phone call is quicker and easier than trying to blindly navigate the software. This type of training is best when it is broken up into short and simple segments, so you can retain and implement what you’ve learned.
Technical support is a very important thing for point of sale services that few retail businesses understand until they need it. It needs to be available 24/7, because you are using the software after business hours. Issues should be resolved quickly and without disruption. The technical support team should also provide a level of service that goes above and beyond your expectations. If not, then you may need to invest in other options.
7. Do You Track Lost Sales?
Lost sales occur when a customer comes into your store asking for a particular product and you don’t have it. It might be out of stock or no longer available. Regardless of the reason, these requests need to be recorded. But, don’t forget to record the reason. That’s important, too.
Lost sales due to a lack of inventory is a direct cost. One of the ways you can look at the inventory cost is how much gross profit was lost on the sale. A lost sales report can give you a historical view on profit lost from poor inventory management.
Going beyond inventory, there’s the cost associated with a lost customer, including the cost to get them back in your store. These aren’t as easy to calculate, but are just as important to mention as the real loss of profit.
The Initiative to Improve
A small business needs to be budget conscious and utilize all their resources to the fullest. This is why choosing a point of sale software is very important. You could be paying too much for services you don’t need or getting too little for the service that you pay for. It’s important to investigate all of the options prior to implementation.
Once implemented, it takes time to learn all of the functionality of your system. When you take the initiative to learn more than simple tasks, you’ll learn more about how your business operates. This gives you a better understanding of the strengths and weaknesses—areas that may need your immediate attention. Using all or most of the functions will also bring a higher rate of return on your investment.
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