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The Green Sheet Online Edition

October 22, 2012 • Issue 12:10:02

Tighten merchant inventory control, boost the bottom line

By Rick Berry
ABC Mobile Pay Inc.

Why is inventory management so important to merchants? And how does effective inventory control benefit them? Inventory is often the largest asset on a retailer's balance sheet and can account for more than 75 percent of a merchant's total assets. Indeed, a business's very existence can be threatened if its owner has only a sketchy idea of what is on hand. Thus, inventory control is a vital concern not just to merchants, but also to the ISOs and merchant level salespeople who serve them.

The biggest expense attributed to carrying inventory is "shrink." Inventory disappears, or shrinks, as a result of theft and administrative error or mismanagement. Logically, if merchants can limit the loss of inventory, they can save money or increase their profits.

Tightening up control systems

By having an accurate physical inventory and access to real-time data analytics, a retailer can easily monitor stock levels and identify products or items with high levels of shrink. Products identified as highly subject to shrink can be monitored closely, packaged or repackaged, and merchandised and distributed differently to help reduce losses.

If merchants are unable to easily and quickly identify their poorest- and best-selling products in real time, they could be in for some headaches. Carrying stock can be a significant expense. By knowing what products they should mark down, retailers are able to clear out inventory rather than have slow-moving or nonselling products languishing in the dark recesses of their dusty stockrooms.

By knowing when they are getting low on their best-selling products, retailers can place restock orders in time to ensure they are never without their most-demanded products on the shelves. How important can that be?

Say a store or chain is plagued with losses from higher-than-normal returns due to a poor economy. Consider how the merchant's inventory control policies can be affected by using an outdated system.

When business begins to pick up, the merchant may become very busy. Yet a return takes at least 10 minutes to process and often much longer. Typically, the retailer's process is fraught with the danger of mistakes and fraud, which chip away at the bottom line.

Spotting error-prone methods

Paper-based systems and transactions that require receipts to execute returns create an environment conducive to error. Say a merchant captures all customer information on handwritten forms at the POS and then transfers the information by typing it into a computer. This step is prone to errors and omissions when people input the data.

And if a customer returns an item, a new receipt is created, based on information that may be incorrect. The customer signs the receipt, and the merchant keeps all of the paperwork for later reconciliation. This is a laborious process that can fail to catch mistakes. Frequently, customers returning discounted merchandise receive full-price refunds because of a lack of easily accessible reports or records to consult.

Creating a better paper trail

Receipts should be bar-coded so that a simple scan of that bar code pulls up the entire transaction history, as it occurred in real time. The actual sale price is captured and recorded. In this way, a receipt cannot be used for more than one return. Consumers cannot fake such receipts, and the merchant's returns can be processed in seconds.

Capitalizing on the available technology to efficiently monitor and control store inventory can be done easily without breaking the bank. In fact, systems can be easily and quickly implemented by merely downloading an app. The app should be priced using an affordable monthly software-as-a-service fee, enabling a quick return on investment. Such systems require no expensive POS licensing fees, heavy investment in POS system equipment or training regimens.

When retailers control and manage their inventory, they control and manage their own business destiny at the same time. Thanks to today's affordable technology, payment professionals can offer merchants POS systems with features that will enable them to do this.

Merchants will enjoy easy management and control of every aspect of their businesses and related inventory and thereby capture all possible profits to which they are entitled. end of article

Rick Berry is the President of ABC Mobile Pay Inc., a Valencia, Calif.-based company specializing in providing affordable, software-as-a-service POS solutions. Rick can be reached at rick@abcmobilepay.com.

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