fill in here. Leave this as a place holder. I have to figure out how I want to answer this.

Receiving new merchandise is a key step in the inventory flow or process. There are a few critical functions that occur when your check in new merchandise and it is recorded on a separate document:

1. You establish the retail price for the new items, which means you establish your margin.
2. You verify the vendor shipped everything you ordered at the cost you agreed to.
3. Having accurate receiving information allows you to do in depth data analysis. For example, when I work with a client and sales in a given category or vendor is lower than last year, one of the first things I check is are they receiving enough new goods to support the sales.

NOTE: You cannot do this is if you add the quantity of incoming goods to the current inventory quantity. It creates a blind spot.

If your point-of-sale receiving reports does not include retail values, you can proceed as follows.

Enter the information you have available – receiving at cost, sales at cost and retail, you’ll still be able to do the analysis. But you will not have visibility to a critical data point since the Receiving Ext P$ is not available to calculate the Receiving Margin $ and Receiving Mrg %.

After you populate the PFG Worksheet, you will be able to compare the Sales Mrg % to the Profit %.

You’ll be able to see the percentage difference between the two, but the meaning is not as obvious because of the missing critical data point.

Complete the PFG Worksheet by filling in all of your data. Then schedule a call with me to review your Profit-First Guide results.

After you populate the PFG Worksheet, you will not be able to compare the Sales Mrg % to the Receiving Mrg% [the receiving at retail provides the means to calculate this]. You begin to see the value in a established digital receiving process.

By tracking each shipment of new goods separately in the point-of-sale system and measuring, you – the retailer, can see how much margin you are realizing on very sale. Another way of saying this is; am I making the profit I thought I would make when I purchased these goods?

For example, I purchased goods from vendor X and I planned to make 57% Receiving Mrg %. When I sold goods from vendor X, I actually made 50% Sales Mrg %

Open To Buy planning answers this question and outside the scope of this tutorial.

OPEN TO BUY is a retailing concept and tool for retailers to invest their inventory dollars wisely, having the right amount of inventory during peak selling times and lower inventory levels during slow selling months. So they have more money in the bank instead of on the shelves.

The process, when done well, allows a retailer to understand where their profitability, their cash on hand will be at the end of a month, a season, or a year.

If you want to learn more about open to buy, check out these resources:
* OTB Blog
* Set up a call with me to discuss if open to buy is for you.

I would not recommend using the gross sales report to conduct the Profit-First Analysis because you will not have visibility to a critical data point – your Sales Mrg %. The Sales Mrg % does not include discounts. This will skew your Profit Margin $.

Another way of saying this is you will look more profitable on paper.

If a basic sales report by vendor is not available from your point-of-sale system. We can take a different approach. Most point-of-sale systems can provide sales by department. The analysis is equally as effective and revealing as doing it by vendor.

Run your sales and receiving report by department. Then fill in the department name in place of the vendor name and proceed with the steps in the Profit-First Guide.

If you do not have a point-of-sale system, it will be difficult or impossible to compile the data in such a way to do the analysis.

To do the margin analysis as described in the Profit-Guide, you will need to know purchases or receiving at cost and retail and sales at cost on retail.

I am a huge believer in taking imperfect action. I would suggest performing the analysis with all vendors you do more than 10,000 a year in sales with.

Then the next time you do the Profit-First analysis, you can focus on the vendors you do less than $10,000 in sales with.

Do the analysis anyway. I think you may find you need to do the analysis from a different point of view. We can take a different approach. Most point-of-sale systems can provide sales by department. The analysis is equally as effective and revealing as doing it by vendor.

Run your sales and receiving report by department. Then fill in the department name in place of the vendor name and proceed with the steps in the Profit-First Guide.