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How can I maximize my monthly cash flow by better managing my aged stock?

To make sure you are maximizing your monthly cash flow you need to deploy a markdowns strategy to manage your slow moving, aged stock. A special report to expedite this procedure is included when you purchase one of our RMS add-in suites or the Reports/Templates Bundle.

Run Manager and select Reports | Custom | Markdowns Control Report. The default filter will list items in stock items with no sales activity in 180 days (6 months). You can lower this number if you haven't been running RMS that long. Example: View items over 90 days old (less than 4 turns).

Notice the Value@Cost total at the top of this report. This is how much cash you are sitting on gathering dust, decreasing in value every day. These are bad purchase decisions made worse by ignoring them. The solution is progressive markdowns and/or posting the items to an auction site.

Click on the Collapse tool button to view dollar value by department. This should be your wake-up call. Now expand a dept to view the item details. Not every item on this report will be a candidate for immediate price markdown, but you'll get the idea.

This report only shows you dead stock. Towards the end of each season you should also look for items that are overstocked in comparison to unit sales. I.E., if you have 50 units in stock and are only selling 1-2 units per month, this item should be marked down to help clear out the overstock.

TIP: The best time to move dead stock is IN SEASON when consumers are buying.

To activate a sale item for posting on your Specials page you must either assign an effective Start/Stop date or Permanent Markdown schedule (for items you want to remain on sale until they are gone). You do this from the Markdowns Control Report by double-clicking on the ILC and editing the Pricing tab. Click the Refresh button in the toolbar to see your changes.

You can also use this report to mark items as Inactive, such as older serialized products you no longer carry. You don't want to delete these items as that would remove the serialized data. Instead mark them Inactive from the Options tab in Item Properties.

A good markdown strategy to follow is 1-2-3 or 2-4-6-8 depending on the product category. Example: High ticket hardware items like bicycles could start at 10% off, then move to 20% off the next month if they are not moving, and finally 30% off the following month. Clothing could start at 20% and move all the way to 80% if you have items that aren't selling.

Remember, it is NOT important to get your cost back out of every item you sell. It's more important to MOVE all your items no matter how low you have to mark them down. Hopefully you sold some at full margin, but when you have a dead item GET RID OF IT no matter how low you have to go.

TIP: There is no such thing as a maximum markdown percentage. If you have difficulty swallowing 80% off, think about donating those items and take the tax write-off, but DON'T sit on these items.

Retailing is all about 'average maintained margins' and turns by category, not what margin you sold each unit for. Example: Say you have a bicycle that came in 3 colors and one of those colors was a poor seller. You are making full margin on the other colors, but have to sell the puke green units below cost. Your average maintained margin for that model was lower than you may have liked, but you got rid of the poor seller and put cash back in the bank. Now you have money to pay your bills, buy new stock and hopefully make fewer buying mistakes in the future. But if you don't follow this management procedure religiously every month -- you are jeodardizing your future and your livelyhood.

Progressive markdowns control is the single most overlooked inventory management tool amongst independent retailers. Apply this simple principle to your stock and we think you'll agree -- it's MUCH better to have cash in the bank than dead stock on the floor.

It is impossible to avoid buying mistakes in retail. The key is to move them out and move on. A proactive policy will ensure your success. A markdowns policy will actually increase your floor traffic and boost sales of REGULARLY priced items. 

The key is progressive markdowns and that means monitoring your markdowns at least once a month. Make this a habit and you'll be putting more money in the bank every month to pay bills and buy more products that sell at full margin.

Combine this strategy with an automated Specials page on your website and you have a win-win situation. Specials page options include an integrated web catalog add-in for RMS, or DRS Linker to sync your sale items with a website service such as, or running a sale item report once a week and exporting it to HTML.

You might also consider posting dead products online to an auction site like eBay ("your junk may be somone else's treasure"). Another option is to donate the items to a non-profit and write off the cost as an expense.

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  1. Dave J

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