What Is the Difference Between Inventory and Stock?

Posted on by Pavel

As an entrepreneur, it’s important to understand the operational components of your business and terminology. While you may understand the overarching structure and have a good feel for making decisions, as you grow, it will take more than that. We’re here to focus on stock and inventory and how they differ – because they do. Whether you create your own products or purchase finished goods, you can have both stock and inventory. Properly categorizing the two will matter when it comes to proper bookkeeping. Additionally, if you pursue financing or funding, lenders or backers will want an accurate representation of a business’s financials. Stock refers to finished goods that are ready to be sent to the consumer or purchased. Inventory on the other hand can include raw materials too. Even if you purchase finished goods, you may have raw materials. For example, if you package your own products or enhance the finished goods purchased, you may have inventory on hand. 

While this is one example, it can get more complex than this. Here’s what you should know about stock versus inventory. 

Stock vs. Inventory: What’s the Difference?

Simply put, the stock is the total supply of finished goods possessed by a business that is available for retail or wholesale. Inventory on the other hand can include both finished goods as well as components that are used to create the finished goods. Not all inventory is stock, but all stock is inventory. Hopefully, you’re following us here. To further your understanding, here’s a simplified breakdown of the differences and uses of stock and inventory.

  • Stock
      • Includes finished goods, ready to be sold 
      • Stock is sold to generate revenue 
  • Inventory
    • Includes finished goods in addition to raw materials or assets used in production
    • Four main types of inventory include: raw materials, work in progress (WIP), finished goods, and maintenance, repair, and operating supplies (MRO)

What is an example of stock or inventory?

While we’ve explained the overview of stock versus inventory, here’s a specific example to help shed more light. 

Let’s say you sell sunglasses. The stock would consist of all sunglasses that are packaged and ready to be shipped or sold to a customer. 

Inventory on the other hand could include the lenses, screws, and all other materials you use to make the sunglasses. However, it also includes your stock of finished sunglasses ready for retail or wholesale. In some cases, a company may purchase the product, but it may not arrive ready for sale. In these cases, the company can still possess inventory as they have more inputs until the product is ready to be sold.

How is accounting for inventory different from stock?

Accounting for inventory is much more complex than accounting for stock. Inventory accounting should include finished products, work-in-process products, and raw materials. Furthermore, you will need to track these materials along the process in order for inventory levels to stay current. Advanced inventory tracking systems are one of the best ways to keep an accurate count of inventory. Additionally, they can help you know when it’s time to reorder or run sales to cut inventory loose. Unless you order completely finished products and sell them as they come you likely have inventory and stock. 

Tips for managing stock levels

Inventory management is crucial, no matter how big or small your business is. Poor inventory management can have devastating impacts on a business. However, the answer is not to stock as much inventory as you can but rather to stock just the right amount and reorder at the right time. To determine when to reorder, you will need to know metrics such as how much time it takes to process or manufacture products and receive them or get them ready to sell. Here are some of our best tips for managing stock levels. 

  • Invest in an inventory management system
  • Find-tune forecasting
  • Utilize an approach such as FIFO (first-in, first-out)
  • Identify slow-selling stock 
  • Audit your stock to ensure levels are accurate 
  • Always track stock 
  • Hire help 

What else do you need to consider

As you aim to effectively manage inventory and stock, and separate the two, you will want to consider effective inventory management practices. Here are 5 factors that can impact inventory management.

  • Finances

Obviously enough, inventory and stock can absorb a lot of cash. Plus, systems to effectively manage it can be costly. However, failure to effectively manage inventory can lead to significant financial issues. Lay the proper foundation and constantly work to improve inventory management – it will pay off. 

  • Market demand

Market demand is important when it comes to understanding how much inventory to hold and when to hold it. It may take some time to perfect the formula. 

  • Theft or loss of inventory 

Sadly, theft happens, and most often it’s internal employees doing the stealing. Property inventory management and security can help you identify theft faster and work to minimize it. However, it’s still something you should account for. 

  • Lead time

Supply chains are complex, and delays can happen. When considering lead times, expect delays and leave some cushion for them to arise. 

  • Forecast quality and quantity

Accuracy matters and quality matters. The larger your company gets, the more complicated forecasting gets, as does quality control. Do your best to keep a close hold on both fronts to help your business prosper. 

How Kickfurther can help

Losing an accurate pulse on stock or inventory can lead to losses, missed sales, and other impacts. One of the main reasons accurate tracking is lost sight of is a lack of resources. Perhaps the lack of resources is by choice or perhaps it’s due to a lack of funds for resources. 

Kickfurther funds up to 100% of your inventory costs on flexible payment terms that you customize and control. With Kickfurther, you can fund your entire order(s) each time you need more inventory and put your existing capital to work growing your business without adding debt or giving up equity.

Why Kickfurther?

  • No immediate repayments: You don’t pay back until your new inventory order begins selling. You set your repayment schedule based on what works best for your cash flow.
  • Non-dilutive: Kickfurther doesn’t take equity in exchange for funding.
  • Not a debt: Kickfurther is not a loan, so it does not put debt on your books. Debt financing options can sometimes further constrain your working capital and access to capital, or even lower your business’s valuation if you are looking at venture capital or a sale.
  • Quick access: You need capital when your supplier payments are due. Kickfurther can fund your entire order(s) each time you need more inventory.

Kickfurther puts you in control of your business while delivering the costliest asset for most CPG brands. By funding your largest expense (inventory), you can free up existing capital to grow your business wherever you need it – product development, advertising, adding headcount, etc.

Closing thoughts

Understanding the difference between inventory and stock is important, especially if you plan to keep up with demand. Operating a business relies heavily on metrics and planning. As your business grows, it can become harder to accurately track stock and inventory, but only if you choose not to invest in tracking it. If you need a boost in working capital to ensure you have funds to invest in operating efficiently and growing your business, lean on Kickfurther for help. Always be one step ahead as a business owner, your competition is waiting for you to skip a beat. 

Beginners Guide to Processing Purchase Orders

Posted on by Pavel

Purchase orders play a pivotal role in business operations, ensuring legal protection, streamlining procurement, and holding suppliers accountable for delivering goods accurately and on time. This aids in inventory management, budget control, and payment verification. This systematic approach is essential for cost-effective procurement and supplier relationship management. Kickfurther purchase order financing helps businesses fulfill customer orders by providing capital based on purchase orders, enabling order fulfillment even with limited capital resources. Kickfurther, is an online inventory funding platform, offering access to purchase order financing, inventory financing, and e-commerce inventory financing for small businesses. Using purchase order processing and Kickfurther financing, businesses can optimize inventory, meet customer demands, and maintain healthy cash flow, creating effective supply chain management and business growth.

Importance of purchase orders in business operations

Purchase orders serve as legally binding contracts, ensuring legal protection. POs aid in inventory management, budget control, and supplier accountability. POs help businesses keep track of their inventory needs. They specify the quantity and type of products or materials to be purchased, for efficient stock management. POs hold suppliers accountable for delivering goods or services accurately, at the agreed-upon price and time. POs also provide essential documentation, streamline procurement, verify payments, support compliance and audits, enable forecasting, and enhance overall efficiency and financial control in the procurement process. 

Different types of purchase orders

  • Standard PO: This is the most common type of PO. It is used for one-time purchases of goods or services. A standard PO specifies the quantity, price, delivery date, and terms for a single transaction.
  • Blanket PO: A blanket PO is used for repetitive or recurring purchases from a single supplier over a specified period, often a year. It outlines the terms and conditions for multiple orders, streamlining the procurement process and ensuring consistency.
  • Contract PO: A contract PO is a long-term agreement between a buyer and a supplier. It typically covers an extended period and includes detailed terms, pricing, and conditions. Contract POs are used for ongoing relationships where flexibility is needed in terms of quantities and delivery schedules.

Preparing for Purchase Order Processing

Preparing for purchase order processing involves identifying organizational needs, selecting reliable suppliers based on various criteria, negotiating terms, and creating detailed purchase orders with item specifics, quantities, prices, delivery dates, and payment terms. After internal review and approvals, the purchase order is transmitted to the supplier, who responds with an order confirmation. Upon delivery, goods or services are inspected, and their receipt is matched with the purchase order. The supplier’s invoice is then verified for accuracy before processing payment. Detailed record-keeping is essential, and ongoing supplier relationship management ensures adherence to quality, timeliness, and cost expectations. These steps collectively facilitate efficient procurement, cost control, and compliance.

A step-by-step guide for processing purchase orders

  • Creating a Purchase Order: Begin by identifying the need for goods or services within your company. Generate a purchase order that includes details such as item descriptions, quantities, prices, delivery dates, and payment terms.
  • Review and Approval: Before sending the purchase order to the supplier, it should undergo an internal review and approval process. This ensures that the purchase aligns with budget constraints and business needs.
  • Transmitting the Purchase Order: Once approved, transmit the purchase order to the chosen supplier. This can be done electronically or through traditional communication methods, depending on your procurement system.
  • Purchase Order Tracking and Management: Keep a comprehensive record of all purchase orders. Track their status, delivery dates, and any changes or modifications. This step is important for maintaining transparency and managing supplier relationships effectively.
  • Invoice Matching and Payment: After goods or services are received, match the supplier’s invoice with the purchase order and the receipt of goods. Verify that the invoice aligns with the agreed-upon terms and quantities. Process payment promptly to maintain a positive relationship with the supplier.
  • Closing Purchase Orders: Once the purchase order is fulfilled, consider closing it in your procurement system. This helps in keeping accurate records and prevents any further transactions related to that specific purchase order.
  • Other tips: Additional tips may include maintaining open communication with suppliers, negotiating favorable terms, and regularly evaluating supplier performance to ensure ongoing quality and efficiency.

Following these steps ensures a systematic and efficient purchase order processing system, which is essential for effective procurement and cost control in any business

How Kickfurther Can Help

Purchase Order financing is a short-term funding solution that assists businesses in fulfilling customer orders when they lack the necessary capital. It works by having a financing provider assess the purchase order and customer’s creditworthiness, then providing funds to cover production or procurement costs. After fulfilling the order, the business repays the financing provider once the customer pays for the products, helping bridge financial gaps and enabling order fulfillment. PO financing is valuable for businesses with cash flow constraints or when handling large orders, allowing them to meet customer demand and grow without financial obstacles.

Kickfurther is the first online inventory funding platform, offering small businesses access to purchase order financing, inventory financing, and e-commerce inventory financing, which may be hard to get through conventional channels. Kickfurther provides financing for businesses with annual revenues from $400,000 to $15 million, that sell physical products or non-perishable consumables. 

Kickfurther funds up to 100% of your inventory costs on flexible payment terms that you customize and control. With Kickfurther, you can fund your entire order(s) each time you need more inventory and put your existing capital to work growing your business without adding debt or giving up equity.

Why Kickfurther?

  • No immediate repayments: You don’t pay back until your new inventory order begins selling. You set your repayment schedule based on what works best for your cash flow.
  • Non-dilutive: Kickfurther doesn’t take equity in exchange for funding.
  • Not a debt: Kickfurther is not a loan, so it does not put debt on your books. Debt financing options can sometimes further constrain your working capital and access to capital, or even lower your business’s valuation if you are looking at venture capital or a sale.
  • Quick access: You need capital when your supplier payments are due. Kickfurther can fund your entire order(s) each time you need more inventory.

Kickfurther puts you in control of your business while delivering the costliest asset for most CPG brands. By funding your largest expense (inventory), you can free up existing capital to grow your business wherever you need it – product development, advertising, adding headcount, etc.

Closing thoughts

Purchase orders provide a structured way for businesses to request goods or services from suppliers, while Kickfurther purchase order financing offers a way to secure the necessary funds to fulfill purchase orders. Together, they enable businesses to optimize their inventory levels, meet customer demand, and maintain healthy cash flow. This synergy between purchase orders and Kickfurther inventory financing ensures effective supply chain management and business growth.

If you’re interested in getting funded at Kickfurther, here are the easy steps to get started:

  • Create a free business account
  • Complete the online application 
  • Review a potential deal with one of our account reps to get funded in minutes

Inventory to Sales Ratio: Formula, Definition, & How It Works

Posted on by Pavel

By monitoring and optimizing the inventory-to-sales ratio and using Kickfurther, an inventory financing platform, businesses can effectively manage their inventory, reduce costs, become more competitive, and increase their profits. 

What is an inventory-to-sales ratio?

The inventory-to-sales ratio is a financial metric that measures the relationship between a company’s inventory levels and its sales over a specific period, typically a month. It is an important indicator for businesses, especially in the retail or manufacturing sectors, because it provides insights into inventory management, sales efficiency, and overall business performance.

 What is a good day’s sales in inventory ratio?

Day Sales in Inventory measures the time it takes to sell inventory, and varies by industry and business model. A “good” DSI ratio depends on industry norms, business goals, and efficient inventory management while avoiding excess carrying costs. It provides valuable insights into inventory efficiency.

Why inventory to sales ratio is important for businesses

The inventory-to-sales ratio is an important metric for businesses for these reasons:

  • Inventory Management Efficiency: It provides insights into how efficiently a business manages its inventory. A high ratio may indicate overstocking and inefficient inventory management, tying up capital in unsold goods. Conversely, a low ratio suggests efficient inventory turnover, meaning products are sold relatively quickly.
  • Cost Control: Maintaining excessive inventory can lead to increased carrying costs, including storage, insurance, and financing expenses. A high ratio may signal higher carrying costs, while a low ratio suggests cost control through optimized inventory levels.
  • Cash Flow Management: Businesses with a high inventory-to-sales ratio may face challenges related to cash flow since funds are tied up in inventory. Conversely, a low ratio often indicates a better cash flow position, as inventory moves quickly and generates revenue.
  • Sales and Revenue Forecasting: Businesses can better predict future sales and revenue trends by analyzing changes in the inventory-to-sales ratio over time. A rising ratio might indicate slowing sales, while a declining ratio could suggest increasing demand.
  • Supplier and Production Planning: An understanding of inventory turnover helps in supplier negotiations and production planning. Businesses with a high turnover can adjust orders and production schedules accordingly, while those with a low turnover may negotiate better terms with suppliers.
  • Risk Mitigation: A well-balanced inventory-to-sales ratio reduces the risk of holding excessive, obsolete, or perishable inventory, minimizing potential losses due to inventory write-offs.
  • Customer Satisfaction: Maintaining appropriate inventory levels ensures that products are available when customers want to purchase them, contributing to customer satisfaction.
  • Profitability: Efficient inventory management can impact profitability. A business with a low ratio can reduce carrying costs and increase cash flow, leading to higher profit margins.
  • Working Capital Management: A balanced inventory-to-sales ratio allows businesses to allocate resources for other operational needs.
  • Competitiveness: Businesses that maintain optimal inventory levels are often more competitive. They can respond to changing customer demands and market fluctuations.

The inventory-to-sales ratio is a critical tool to assess a business’s inventory management and financial performance. 

How to Calculate the Inventory-to-Sales Ratio

The formula for calculating the inventory-to-sales ratio is:

Explanation of the formula: 

Inventory to Sales Ratio = (Average Inventory / Net Sales) x 100

Here’s what each component represents:

Average Inventory for the Period: This is the average value of a company’s inventory over a specific time frame. It is usually calculated by taking the beginning inventory value, adding the ending inventory value, and then dividing by 2. Alternatively, some businesses calculate it as the average inventory value at the beginning and end of each month within the period.

Total Sales for the Period: This refers to the total revenue generated from sales during the same time frame. It includes all sales, whether they are to customers or other businesses.

The resulting ratio can provide valuable insights into a company’s inventory management: 

A high inventory-to-sales ratio indicates that a business carries a significant amount of inventory relative to its sales. This might suggest overstocking, inefficient inventory management, or difficulties in selling products.

A low inventory-to-sales ratio implies that a business is efficiently managing its inventory and selling products relatively quickly in relation to the inventory levels. It can indicate effective sales strategies and good inventory turnover.

A balanced inventory-to-sales ratio suggests that a company’s inventory levels are well-matched to its sales volume, indicating a healthy and sustainable inventory management strategy.

The ideal inventory-to-sales ratio can vary widely depending on the industry, business model, and specific circumstances. 

Factors that Influence Inventory to Sales Ratio

The inventory-to-sales ratio is influenced by factors that vary from one business to another. Understanding these factors helps manage inventory.  Businesses should adjust their inventory management strategies to maintain inventory-to-sales ratio and adapt to changing market conditions. Factors that influence the inventory-to-sales ratio are:

Industry and Business Model: Different industries have different inventory turnover rates. 

Seasonality: Businesses that experience seasonal fluctuations in demand often see corresponding changes in their inventory-to-sales ratio. They build up inventory during peak seasons and reduce it during slower periods.

Market Trends: Shifts in consumer preferences, market trends, and economic conditions impact the demand for products. Keeping up with these trends is crucial for maintaining inventory levels.

Supplier Lead Times: The time it takes for suppliers to deliver goods can affect inventory levels. Longer lead times may require higher inventory levels to avoid stockouts.

Production and Manufacturing Processes: Manufacturing businesses may have longer production cycles that influence their inventory turnover rates. Efficient production processes can reduce the need for excess inventory.

Demand Forecasting: The accuracy of demand forecasting plays a significant role in determining inventory levels. Accurate forecasts help businesses maintain the right amount of inventory.

Supplier Performance: Supplier reliability, on-time deliveries, and quality can impact the inventory-to-sales ratio. Poor supplier performance may require businesses to keep higher safety stocks.

Sales and Marketing Strategies: The effectiveness of sales and marketing efforts can influence sales volumes. Successful promotions or marketing campaigns can lead to increased sales and changes in the ratio.

Economic Conditions: Economic factors, such as inflation or recessions, can affect consumer spending patterns and, consequently, inventory turnover rates.

Inventory Holding Costs: The costs associated with holding inventory, including storage, insurance, and financing costs, can impact the decision to maintain higher or lower inventory levels.

Supply Chain Disruptions: Disruptions in the supply chain, such as natural disasters or transportation issues, can lead to supply shortages and affect inventory levels.

Technology and Automation: Implementation of advanced inventory management technologies and automation can improve efficiency and lower the need for excess inventory.

Competitive Landscape: Competitive pressures and the actions of competitors can influence inventory strategies. Price wars or competitive product launches may require adjustments in inventory levels.

Regulatory Compliance: Regulatory requirements in industries like healthcare or food, can dictate minimum inventory levels to ensure compliance with safety and quality standards.

Customer Behavior: Changes in customer buying behavior, like online shopping or subscription models, can affect sales patterns and inventory requirements.

Global Supply Chain Factors: International trade dynamics, including tariffs, trade agreements, and geopolitical events, can impact the availability and cost of inventory.

Benefits of Monitoring and Managing the Ratio

Monitoring and managing the inventory-to-sales ratio provides benefits for businesses. It offers insights into inventory efficiency, helps optimize turnover rates, and reduces carrying costs. It improves cash flow,  freeing up capital for other needs. This ratio aids in demand forecasting and production planning, ensuring timely responses to customer demand. It allows businesses to adapt to market shifts. Tracking and managing this ratio is a vital metric for success.

Best Practices for Optimizing Your Inventory to Sales Ratio

Here are some best practices to help businesses achieve and maintain an optimal  inventory-to-sales ratio:

    • Accurate Demand Forecasting: Invest in robust demand forecasting tools to accurately predict demand and minimize overstocking or stockouts.
    • Just-in-Time (JIT) Inventory: Implement JIT inventory management, to receive inventory only when needed and to reduce carrying costs and improve turnover.
    • Safety Stock Management: Maintain a safe stock of essential items to safeguard against unexpected demand spikes or supply disruptions. 
    • ABC Analysis: Categorize inventory items into A, B, and C groups based on their importance and demand. Allocate resources and attention accordingly.
    • Supplier Collaboration:  Collaborate with suppliers to improve lead times, order accuracy, and delivery reliability. Strong supplier relationships help reduce the need for excessive inventory.
    • Inventory Management Software:  Use inventory management software to monitor stock levels, track sales trends, and automate reordering processes.
    • Inventory Audits: Conduct regular physical inventory audits to ensure accuracy and identify discrepancies to help prevent overstocking and uncovering obsolete items.
    • Sales and Operations Planning: Implement these processes that align sales forecasts, production plans, and inventory levels for smoother operations.
    • Lead Time Reduction: Reduce supplier lead times through negotiation, better communication, or diversify suppliers to mitigate supply chain risks.
    • Economic Order Quantity:  Apply EOQ principles to determine optimal order quantity to minimize ordering and holding costs.
    • Continuous Monitoring: Continuously monitor the inventory-to-sales ratio and adjust strategy. 
    • Supplier Performance Metrics: Define key performance indicators for suppliers and regularly assess their performance to encourage accountability and identify areas for improvement.
    • Cross-functional collaboration: Foster collaboration between departments to ensure alignment in inventory management strategies and demand forecasting.
    • Data Analytics:  Leverage data analytics to gain deeper insights into sales patterns, demand drivers, and inventory trends. 
    • Inventory Turnover Goals: Set realistic inventory turnover goals based on industry benchmarks and business objectives. Regularly track and assess progress.

How Kickfurther Can Help

Inventory-to-sales ratio guides businesses in maintaining efficient inventory levels, while inventory financing serves as a financial tool to access capital tied up in inventory when needed.

By optimizing inventory levels based on the inventory-to-sales ratio, businesses can strike a balance between holding sufficient inventory for customer demand and avoiding overstocking. When working capital is needed, especially during seasonal fluctuations or growth phases, inventory financing enables businesses to unlock the value of their inventory, providing the necessary liquidity to meet operational needs, prevent stockouts, and maintain a healthy cash flow. 

Kickfurther funds up to 100% of your inventory costs on flexible payment terms that you customize and control. With Kickfurther, you can fund your entire order(s) each time you need more inventory and put your existing capital to work growing your business without adding debt or giving up equity.

Why Kickfurther?

  • No immediate repayments: You don’t pay back until your new inventory order begins selling. You set your repayment schedule based on what works best for your cash flow.
  • Non-dilutive: Kickfurther doesn’t take equity in exchange for funding.
  • Not a debt: Kickfurther is not a loan, so it does not put debt on your books. Debt financing options can sometimes further constrain your working capital and access to capital, or even lower your business’s valuation if you are looking at venture capital or a sale.
  • Quick access: You need capital when your supplier payments are due. Kickfurther can fund your entire order(s) each time you need more inventory.

Kickfurther puts you in control of your business while delivering the costliest asset for most brands. By funding your largest expense (inventory), you can free up existing capital to grow your business wherever you need it – product development, advertising, adding headcount, etc.

Closing thoughts

By monitoring and analyzing inventory sales ratio and accessing Kickfurther inventory financing, businesses can make informed decisions to improve efficiency, reduce costs, enhance cash flow, and stay competitive in their industries.

If you’re interested in getting funded at Kickfurther, here are the easy steps to get started:

  • Create a free business account
  • Complete the online application 
  • Review a potential deal with one of our account reps to get funded in minutes

Setting Distributors Up for Success – A Guide to Inventory Management and Funding

Posted on by BJ Scott

In the distribution world, success often hinges on efficient inventory management and securing the necessary funding to keep operations running smoothly. For distributors, managing inventory is not just about having products on hand but also about optimizing cash flow and ensuring timely customer deliveries. 

In this article, we will delve into the crucial aspects of inventory management and inventory funding, exploring how they can work together to set distributors up for success. We will also take a closer look at how services like SimplyDepo and Kickfurther can assist in achieving these goals.

 

Part 1: Securing Inventory Financing

Securing the necessary funding to maintain an optimal inventory level is a key challenge for many distributors. Whether you are a small business or a larger enterprise, access to capital is vital for purchasing, storing, and distributing goods. 

Here are some methods to consider:

Traditional Bank Loans: Many distributors rely on bank loans to finance their inventory. While this can be a viable option, it often comes with stringent eligibility criteria, lengthy approval processes, and interest rates that can strain profit margins.

Inventory Financing: Inventory financing, also known as inventory loans or asset-based lending, allows distributors to use their existing inventory as collateral to secure a loan. This can provide a quick and flexible funding source without a perfect credit history.

Alternative Financing Options: In recent years, alternative financing options like peer-to-peer lending and crowdfunding have gained popularity. These platforms can connect distributors with investors looking to support businesses in exchange for a return on their investment.

 

Part 2: Order & Inventory Management

Efficient order and inventory management are crucial for distributors looking to reduce costs, minimize stockouts, and improve customer satisfaction. 

Here are some best practices:

Real-Time Inventory Tracking: Implement a robust inventory management system that tracks inventory levels in real time. This enables you to make informed decisions about reordering and preventing overstock or stockouts.

Demand Forecasting: Use historical data and market trends to forecast demand accurately. By understanding which products are likely in high demand, you can optimize your inventory levels and reduce carrying costs.

Supplier Relationships: Cultivate strong relationships with your suppliers. Negotiate favorable terms, explore vendor-managed inventory (VMI) agreements, and work together to improve lead times and order accuracy.

Just-in-Time (JIT) Inventory: Consider implementing a JIT inventory system to reduce excess inventory and associated carrying costs. This approach helps you receive goods only when needed, improving cash flow.

 

Part 3: How Both Services Can Help – SimplyDepo and Kickfurther

SimplyDepo and Kickfurther are two innovative platforms that can assist distributors in achieving their inventory management and funding goals.

Kickfurther: This platform specializes in providing inventory funding for distributors. It offers quick and hassle-free financing for new and existing inventory. Kickfurther helps you bridge cash flow gaps by paying your suppliers upfront without taking on debt or giving up equity,

Kickfurther will fund up to 100% of your cost of goods, and you don’t make any payments on that inventory until after it’s sold. Taking advantage of their inventory funding platform enables you to purchase more inventory and possibly leverage an order volume discount or invest in other aspects of your business.

Why Kickfurther?

No immediate repayments: You don’t pay back until your new inventory order begins selling. You set your repayment schedule based on what works best for your cash flow.

Non-dilutive: Kickfurther doesn’t take equity in exchange for funding.

Not a debt: Kickfurther is not a loan, so it does not put debt on your books. Debt financing options can sometimes further constrain your working capital and access to capital or even lower your business’s valuation if you are looking at venture capital or a sale.

Quick access: You need capital when your supplier payments are due. Kickfurther can fund your entire order(s) each time you need more inventory.

Kickfurther puts you in control of your business while delivering the costliest asset for most distributors. By funding your largest expense (inventory), you can free up existing capital to grow your distribution business wherever you need – product development, advertising, adding headcount, etc.

Maintaining adequate inventory levels can ensure timely deliveries of products and avoid stockouts, helping to develop healthy relationships with retailers and distributors. Preserve your cash flow for business operations and continue to scale your business with inventory funding. 

SimplyDepo: SimplyDepo is dedicated to equipping distributors with top-notch tools to streamline wholesale operations, particularly inventory management. Its cutting-edge technology delivers significant time savings for both wholesalers and retailers, effectively eliminating the need for time-consuming order forms, catalogs, email, phone calls, and fax transmissions. With a comprehensive feature set integrated into a single platform, SimplyDepo fully caters to the needs of small and medium-sized wholesale enterprises.

The robust mobile applications designed for sales representatives and merchandisers offer unparalleled convenience, enabling them to place orders effortlessly, access catalogs, check inventory, review order histories, and plan routes while on the move. Meanwhile, delivery managers can efficiently coordinate fulfillment and delivery processes. Notably, SimplyDepo operates entirely on a Software as a Service (SaaS) model, rendering the traditional paperwork obsolete when joining the platform.

By utilizing these services, distributors can streamline their inventory financing and management processes, ensuring they have the right products at the right time while keeping their financial health in check.

 

Closing thoughts

In the highly competitive distribution world, effective inventory management and reliable inventory financing are the cornerstones of success. Distributors must balance having enough inventory to meet customer demand and avoiding excessive carrying costs. Services like SimplyDepo and Kickfurther offer valuable assistance, making it easier for distributors to secure funding and optimize inventory management strategies. By implementing these best practices and leveraging these platforms, distributors can position themselves for growth and prosperity in the dynamic distribution world.

Inventory Holding Costs: How to Calculate + Formula

Posted on by Pavel

Inventory holding costs can soak up working capital. When mismanaged, it can lead to significant loss and missed opportunities. While we know your intention is to learn more, and that’s why you are here, we want to start by pointing out that holding costs and inventory costs are complex. While we can provide an overview of things to be mindful of and help you understand inventory management, it’s important to stay close to your own business and have a clear understanding. Things that can impact a business are like a domino effect so it’s important to know where they are stemming from.

Keep reading as we explain inventory holding costs, how to calculate them, and why they are important to understand.

What are inventory holding costs?

Inventory holding costs are the costs associated with storing (or holding) inventory until it is sold. Inventory that remains unsold can tie up cash flow in several ways. Additionally, some products are more expensive to hold than others. Hence why it’s encouraged to stock just the right amount of inventory, not too little and not too much. Holding costs can include storage space, insurance, labor, damaged or expired goods, and so forth. While holding costs are unavoidable, there are things you can do to minimize the expense. Understanding holding costs associated with your business is a good place to break down the equation. While we are unable to analyze your business, we can help guide you in the right direction. Let’s take a look at how to calculate the costs of inventory and why it’s important. 

Why is calculating the cost of carrying inventory important?

In business, revenue is one thing and profit is another. To clearly understand the difference between the two and continually drive the bottom line, you’ll need to know where your money is going. By calculating the cost of carrying inventory, you can be one step closer to accurately calculating profit margins. Even businesses that are operating with healthy profit margins can experience cash flow issues. Inventory financing is often used to overcome cash flow challenges that can prevent businesses from stocking enough inventory. Leveraging inventory financing can also help businesses have more cash to invest in other areas of growth. 

How to calculate inventory holding costs

As you aim to calculate inventory holding costs, note that it should be within the 20% to 30% range of your total inventory value. If you pursue inventory financing, backers or lenders will likely want a full financial picture of where money is going to justify the need for cash. To accurately calculate inventory holding costs here are some components/calculations you’ll need to understand. 

  • Storage costs: To calculate storage costs, include all costs associated with physically storing inventory. This could include rent for the space, utilities, insurance, and more.
  • Depreciation: Depreciation, much like opportunity cost, is intangible. Naturally, over time the value of inventory decreases, which is known as inventory. To calculate depreciation you can use the following formula:
      • Depreciation = (cost to make goods – salvageable value) / inventory lifespan
  • Opportunity costs: To calculate opportunity costs take the potential return from the unchosen scenario and subtract it from the return from the scenario chosen. Opportunity costs in relation to inventory represent the cost of holding dead inventory as opposed to other, potentially more profitable products. 
  • Employee costs: Labor adds up, and while it’s an operating cost, you should be able to calculate labor that pertains to holding inventory. 

The formula to calculate holding costs

  • Inventory holding costs = (storage costs + employee salaries + opportunity costs + depreciation costs) / total value of inventory 

Where do you typically encounter holding costs?

Inventory holding costs can impact financials. As you calculate profit margins, balance sheets, and other important financial documents, you’ll likely encounter holding costs. Even if you operate a lean and efficient business that executes efficient inventory management, there will be holding costs. Regardless though, you should work to minimize holding costs. Holding too much inventory is not a good thing. You want to hold enough inventory to ensure you do not miss sales, but you do not want to waste resources overstocking inventory. Utilizing effective inventory management is critical to ensure you meet the demands of customers while protecting your bottom line. 

How Kickfurther can help

Kickfurther funds up to 100% of your inventory costs on flexible payment terms that you customize and control. With Kickfurther, you can fund your entire order(s) each time you need more inventory and put your existing capital to work growing your business without adding debt or giving up equity.

Why Kickfurther?

  • No immediate repayments: You don’t pay back until your new inventory order begins selling. You set your repayment schedule based on what works best for your cash flow.
  • Non-dilutive: Kickfurther doesn’t take equity in exchange for funding.
  • Not a debt: Kickfurther is not a loan, so it does not put debt on your books. Debt financing options can sometimes further constrain your working capital and access to capital, or even lower your business’s valuation if you are looking at venture capital or a sale.
  • Quick access: You need capital when your supplier payments are due. Kickfurther can fund your entire order(s) each time you need more inventory.

Kickfurther puts you in control of your business while delivering the costliest asset for most CPG brands. By funding your largest expense (inventory), you can free up existing capital to grow your business wherever you need it – product development, advertising, adding headcount, etc.

Closing thoughts

Inventory plays a pivotal role for CPG brands. Understocking and overstocking inventory can both lead to problems and or missed opportunities. As you try to navigate the perfect balance of effective inventory management and efficient operation, you may encounter cash flow challenges. With delays in accounts receivable and high operating costs (no matter how you try to minimize them), you will need plenty of cash to hold inventory and keep operations going. While there’s no one-size-fits-all solution, inventory financing may be an effective solution for your business. CPG brands may struggle to obtain inventory financing that works. As a team of entrepreneurs, we truly understand the challenges you may be going through. At Kickfurther we aim to keep business owners in control while allowing them to access funding for up to 100% of inventory with no immediate repayments. To get started, create a free business profile at Kickfurther. It’s fun and easy, and can really pay off in the end. So, what are you waiting for? 

 

How to Use Technology To Boost Supplier Relationships

Posted on by Pavel

Technology can be viewed as a good and bad thing, but primarily in business it offers tremendous opportunity. For supplier relationships, it delivers a long list of benefits. From expanding your reach to suppliers to offering better and faster communication, technology can boost supplier relationships. However, it can also present some risks and downsides too. As a business owner, you’ll want to make sound decisions, and avoid temptation of things that sound too good to be true. When it comes to technology we must know what to leverage, and what to refrain from. With the goal being to grow your business, we provide valuable insights as to how to boost supplier relationships with technology. 

Benefits of using technology to boost supplier relationships

  • Better communication: Communication is key in everything we do. We often overlook how easy it is to reach a business or person nowadays – thanks to technology. From email to text messages to applications that allow us to view our account and receive support, communication is more accessible. The one thing that is still dependent upon you though is to deliver the right messages. Stop to think about how you say things or what you want to accomplish when communicating. Being easy to deal with is a great way to gain trust with your supplier. 
  • Collaboration: With the ability to snapshot a picture over in a matter of seconds or send a text with a brilliant idea, we can collaborate with partners. Maybe it’s even through video calls that you collaborate. Regardless of the way, there are endless ways to work closely with suppliers for better collaboration. On the suppliers end, this can allow them to better meet your needs, thus increasing their chance of retaining the account. Technology can benefit both you and your supplier, and this is just one example of that.
  • Improved transparency: Thanks to technology we can know what’s going on without picking up the phone in most cases. From tracking orders to viewing contracts via the click of a button, we can stay in the know. Choose a supplier that invests in technology that allows them to deliver transparency for partners. 
  • Increased access to funding: Technology and the internet creates opportunity for business owners. Beyond selling more products in the e-commerce space, you can access funding or e-commerce financing options too. Leveraging inventory financing can give you more buying power, which is yet another way to build a better relationship with suppliers. Who knows, they may even be willing to offer better pricing for bulk or standing orders. 

Which technologies can be used to boost supplier relationships?

  • Cloud based solutions: Often used to streamline communication and visibility. Examples of cloud based solutions that update in real-time include cloud drives that allow documents to be shared, project management programs, and reporting dashboards. 
  • Applications: Suppliers can offer applications that can be customized for customers. Through these applications, customers can access things such as order tracking, contracts, or message boards. 
  • Cell phones: In today’s world most of us are given a cell phone, not a landline or extension, although we may still have those too. With portable technology such as cell phones and tablets, we are easier to reach, even on-the-go.
  • Inventory management systems: Inventory management systems can automatically re-order products as needed. It can also help you gauge season slumps or season speed-ups. Being able to provide suppliers with accurate updates on the sales cycle can encourage them to work with you.
  • Inventory financing: Inventory financing can provide the funds you need to order inventory, without tangling up cash. With the power to keep investing in your business without stocking less inventory, you can grow faster. For suppliers, this can mean getting paid faster and holding more consistent orders. Both of these outcomes can make you more desirable to work with, thus building trust. 

Tips for supplier relationship management in relation to technology

  • Use technology properly: Technology should be properly used in order to be as effective as possible. It’s easy to get sucked into too much technology, which can actually lead to inaccuracy and confusion. Before deploying technology make sure you need it and make sure there’s no overlap that could cause confusion. 
  • Leverage competition without breaking relationships: With technology, we have more access to options. While this can deliver the opportunity to pick your head up and compare offers and offerings from time-to-time, be mindful of the relationship you have built. Find ways to professionally and respectfully leverage the information to renegotiate or prove there are better ways to do things. 
  • Align technologies: Once you’ve found your supplier, align technologies to ensure all are operating on the same page. As you shop suppliers it can be helpful to discuss technology as it can help you make your decision. 

How Kickfurther can help

Paying suppliers on time and being equipped with cash to order inventory on a regular basis can help build relationships, technology set aside. At Kickfurther you can get funding for up to 100% of your inventory with no immediate repayments. Plus, funding through Kickfurther is up to 30% lower cost than comparable options. Through our entrepreneur-centric platform, business owners can create a business profile to showcase their business pitch. Through the details you provide, our community of backers can choose to provide the funding you need. This creates the opportunity for two passionate parties to come together in pursuit of success. Our funding model is much different than others you may have heard of. Here are just a few of the highlights:

  1. No immediate repayments. You control repayment. Don’t pay until your product sells.
  2. Non-dilutive. Maintain equity in your business, we know how hard you worked for it. We are here to work with you, not against you. 
  3. Not a debt. Because you have enough financial strain, this is not a loan. 
  4. Upfront capital. Pay suppliers faster with upfront capital, there when you need it! 

Closing thoughts

Suppliers play a critical role in the success of your business. Finding trusted partners that meet your needs, or exceed them, can keep your business growing. Communication on the other hand is also extremely important in everything we do in business and our personal lives. With communication being more accessible thanks to technology, it’s important to remind ourselves of the power of words. Even if it’s a quick text, stop to think through your message before sending. Just because we are all more accessible, does not mean we have to respond right away. The person on the other end of the message deserves a clear response that you mean. As you work toward growing a business you are overly proud of, you may need funding along the way. If inventory funding can boost growth while helping your supplier relationship, visit Kickfurther for affordable and flexible options.