What is the Cost of Not Acting?

In a previous article, I discussed Return on Investment you will receive by implementing an effective Point of Sale & Inventory Control System. Today let’s look at that topic "in reverse". What is it costing your company NOT to act now, or in delaying implementation of a system?

For the sake of our discussion, let’s assume your annual sales are $1.2M and your average inventory on hand is $400k. We are also assuming your cost of goods is 50%. If your actual numbers are more or less, feel free to use them, the formula still works.

The Inventory Management portion of the software is the backbone of the system. Implementing this alone will make sure you have the right product at the right time. It allows you to eliminate or decrease inventory that doesn’t sell, and increase inventory that sells. Overall this can increase your sales by 10%. So $120k minus $60k for cost of goods, and we’ll subtract another $10k for miscellaneous costs. That’s $50,000 added to your bottom line each and every year!

The system can also allow you to decrease the amount of inventory you keep on hand by approximately 20%. So if you decrease your inventory by $80k times a 30% carrying cost, that adds another $24k to your bottom line.

What about Vendor Management? Receive Vendor discounts on payment terms, quantity ordering, mark-down money, and have leverage for future negotiations. We estimate that you can receive 6% in vendor discounts using our system. 6% times $600k cost of goods, adds another $36k to your bottom line.

I could go on and on, including Gift Cards, E-Commerce, Auto-Purchasing, etc. So think about it! For every month you continue guessing at your inventory levels, or your sales information; for every month you allow your shrinkage to be 6-12% of your annual sales, for every wasted hour of labor,


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