Stock Turnover or Stock Turn is a measure of how quickly stock is converted to cash (sales). Use this report to see what stock is, and is not, working well and to assist in setting min & max levels.
In this guide we’ll cover:
- What is Stock Turn
- Stock out days
- How to use this report
What is Stock turn
Stock turn is a measure of how quickly you turn stock into cash (PROFIT)
Stock turn = Sales / average value of stock on hand
or Revenue from sales of stock / average cost of stock holding (money tied up)
What is a good number ?
The higher the number the better, the number will change as you adjust the date range that you are running the report over.
Tip: Use this report regularly with the same sales period (such as 4 weeks) to learn what a good and bad stock turn number looks like.
A higher stock turn could justify buying more stock at a lower margin. Consider this example:
In this example Product A has a higher margin than product B, if you didn’t look at the stock turn you could choose to stock a higher number of Product A. It appears it will make you more money.
When Stock turn is included, you can see that Product B will give you a much faster return on your investment.
Tip: If you export the Stock Turnover Report you will get a combination of the Kitomba Stock Turnover and Stock Statistics reports which includes the margin and more.
Stockout days are the number of days when you don’t have that product in stock.
1. Stockout days are not a bad thing for low stock turn products
2. Low stock turn + zero stock out days could mean that you are holding too much stock
3. High stock turn + stock out days could mean that you are not holding enough stock
Using the Stock Turnover Report to improve your Stock Turn
The stock turnover report can be used to assist in setting min & max levels. It can help you to see which products turn your investment into profit faster.
A product with a low stock turn and zero stock out days indicates that you are probably holding too much stock, or that you could consider dropping this item.
A product with a high stock turn number and high stock out days shows a missed opportunity to sell more of this item. You could increase your minimum and maximum levels or your frequency of ordering or both.
Look out for an asterisk next to the stock turn number, this means that the stock on hand for this item has gone into a negative value over the date range. This should never happen and indicates your stock levels in Kitomba are inaccurate. To avoid this you can do regular stocktakes.