At the end of 2008, most Russian companies, in anticipation of further sales growth, continued to increase production or purchase volumes. However, the development of the financial crisis led to a significant decrease in demand. As a result, the products were unclaimed, warehouses were overcrowded, and the financial condition of most market entities worsened.

In addition, during the crisis, many enterprises faced problems with financing current activities and, as a result, lost the opportunity to have excess inventory. In this regard, enterprises are currently forced to optimize and manage their costs associated with inventory.

How can calculating the optimal inventory size help the CFO improve the efficiency of managing current assets?

To meet current demand for a product, an enterprise must provide a certain level of inventory, the amount of which is determined on the basis of data for previous periods. At the same time, no matter how accurately we try to predict demand, actual consumption of a product can be either more or less than predicted.

Also, in order to replenish inventory in a timely manner (calculate inventory turnover), the enterprise must predict the planned lead time of the order by the supplier, the value of which is based on data on past deliveries. This value is also difficult to predict with 100% accuracy. Sometimes the actual order fulfillment time is longer than predicted.

In connection with the situation of uncertainty described above, the enterprise is forced to create safety stock to ensure that customer orders can be fulfilled when actual consumption exceeds forecasts, and to prevent stockouts from occurring if lead times are unplanned.

Thus, safety stocks are part of production and sales stocks designed to minimize logistics and financial risks associated with unforeseen fluctuations in demand for manufactured goods, failure to fulfill contractual obligations for the supply of raw materials and materials (violation of deadlines, supply volumes, quality of supplied resources and etc.), failures in production and technological cycles and other unforeseen circumstances.

By creating a safety stock, an enterprise can reduce the risks of order failure or incomplete order fulfillment. However, reducing risks comes at a price. Therefore, when determining the size of safety stocks, the financial director is between two fires: on the one hand, the creation of additional safety stocks causes additional costs, on the other hand, their absence may entail possible losses associated with non-fulfillment of the order.

In this regard, the main task of the financial director in the process of inventory management is, on the one hand, to reduce storage costs and reduce the amount of working capital “frozen” in the goods, on the other hand, to reduce the risks of non-fulfillment of the customer’s order. This is the whole point of calculating reserves.

To reduce the risk of order failure, it is necessary to control two quantities:

safety stock size And order point(the moment of inventory replenishment when a certain level of inventory size is reached).

Let's consider how the standard for the optimal size of warehouse stocks is determined by the financial department of the Myasprominvest meat processing enterprise.

At Myasprominvest, all material resources used in production are divided into three groups according to the degree of their influence on relevant costs.

Relevant costs associated with inventories are usually divided into the following groups:

• costs associated with storing inventory;
• costs associated with fulfilling orders;
• losses arising from a shortage of inventories (expenses in the form of loss of part of the profit or loss of customers and part of the company’s business reputation).

Using the ABC method, the company grouped inventories into three groups (A, B, C).

Thus, the first group of the most important resources included meat, spices, and raw materials for packaging. The second group includes resources, the absence of which may affect the production process, but will not cause it to stop: mainly fuels and lubricants for the vehicle fleet, as well as spare parts for equipment repair. And the third group is all other resources that are purchased as needed and have virtually no impact on the production process.

Based on the degree of importance for group A inventory management, the company uses the most sophisticated methods, carefully monitoring turnover, statistics and increasing the accuracy of calculations. It is for the stocks of this group that the company calculates the size of the safety stock and the order point. For group B, simpler calculations are used. Group C inventories are tracked less frequently, with reasonable safety stock being created to ensure they are always in stock. The functions of control over inventories of this category are delegated to middle managers.

For the selected group A, it is calculated separately current and safety stocks, each of which, in turn, can be divided into certain elements.

The definition of safety stock was made above. Current stock– the main part of the production (sales) stock, intended to ensure continuity of the production (sales) process between two adjacent deliveries.

Rationing the current stock consists of finding the maximum value of production needs for material assets between two next deliveries. This need is defined as the product of average daily consumption by the delivery interval (the time interval between placing an order and receiving it):
Ztek = Rday * T,

Where Ztech– current stock;

Rday

T– delivery interval, days

In turn, the average daily consumption is found by dividing the total need for material by the rounded number of calendar days in the planning period:
Rday = Ryear: 360

Where Rday– average daily consumption of materials;

Ryear– accordingly, the annual consumption of materials.

Safety stock rationing is based on the following calculation: the product of the average daily material consumption by the gap in the supply interval divided by two:
Zstr = Rday (Tfact – Tplan) / 2

Where Zstr– safety stock;

Tfact, Tplan– actual and planned delivery intervals, respectively.

When calculating the safety stock for commodity stocks of groups B and C, the Myasprominvest company uses a consolidated estimate (safety stock is taken in the amount of 50% of the current stock).

Let's look at an example of calculating safety stock and order points. The Myasprominvest enterprise purchases raw meat from a supplier, and the annual volume of demand for 2008 was 3,600 tons, the average delivery period was 14 days, the maximum deviation of the delivery time from the average was 5 days. The enterprise uses raw materials evenly, and a reserve stock equal to 6 t.

The average consumption of raw materials will be:
Rday = 3,600 t / 360 = 10 t

Ztek = 10 * 14 = 140 t

Zstr = 10 * 5 / 2 = 25 t

The order renewal point will be equal to:
Tz = 140 t + 25 t = 165 t

This means that only when the stock level of raw materials in the warehouse reaches 165 tons, the purchasing service should place another order to the supplier.

Thus, the financial service of the enterprise controls financial risks associated with possible losses from the formation of shortages, and also prevents abuse on the part of the procurement service associated with unreasonable purchases of raw materials.

In a fixed order quantity inventory control system, the constant is the replenishment order size. The time intervals at which the order is placed may vary in this case.

The standardized quantities in this system are the order quantity, the amount of stock at the time the order is placed (the so-called order point) and the amount of safety stock. A purchase order is placed when the stock on hand is reduced to the reorder point. After placing an order, the stock continues to decrease, since the ordered goods are not delivered immediately, but after some period of time t. The amount of stock at the order point is chosen such that in a normal working situation during time t the stock does not fall below the insurance value. If demand unexpectedly increases, or the delivery date is missed, the safety stock will begin to work.

In practice, a stock control system with a fixed order quantity is used mainly in the following cases:

• large losses due to lack of stock;
• high costs of storing inventory;
• high cost of the ordered goods;
• high degree of demand uncertainty;
• Availability of a price discount depending on the quantity ordered.

Once the choice of a replenishment system has been made, it is necessary to quantify the size of the ordered batch, as well as the time interval after which the order is repeated.

Also, to optimize costs associated with warehouse stocks, the financial service can calculate the optimal batch size of supplied raw materials and materials. The optimal batch size and optimal delivery frequency depend on the following factors:

• volume of demand (turnover);
• costs of delivery of goods;
• inventory storage costs.

The minimum total costs of delivery and storage are chosen as an optimality criterion. Both delivery costs and storage costs depend on the size of the order, however, the nature of the dependence of each of these cost items on the order volume is different. The cost of delivering goods decreases as the order size increases, since transportation is carried out in larger quantities and, therefore, less frequently. Storage costs increase in direct proportion to the size of the order. By adding both graphs, we obtain a curve reflecting the nature of the dependence of the total costs of transportation and storage on the size of the ordered batch.

The optimal order size is determined by Wilson's formula:
Where Sopt– optimal size of the ordered batch in pieces;

ABOUT– the required volume of purchase of goods (stock) per year in pieces;

St– costs associated with placement, delivery, acceptance of a batch of ordered goods;

Cx– costs associated with storing one unit of inventory per year.

It is worth noting that the mathematical models proposed above can be useful tools to help the CFO monitor the situation, but these models may not be a complete reflection of reality. In addition, decision makers need not only to know the above formulas, but also to systematically understand the processes they manage. Therefore, when exercising control over current assets, it is necessary to take into account both the specifics of the company and the restrictions caused by the realities of the Russian economy.

The CFO's job of controlling inventory can be complicated by the following issues that the CFO needs to be aware of and address if possible.

One of the problems often encountered at enterprises is poorly compiled product reference books: the same type of inventory can be stored under different names in different warehouses. As a result, situations are possible when the purchasing department purchases materials that are already in stock, thereby inflating storage costs and increasing the diversion of cash resources to finance working capital. It is necessary to track duplicates and eliminate them.

There are also problems associated with employee errors. For example, a delivery may be delayed because the manager forgot to send the order and sent it late, thereby increasing the order execution time. A control system can eliminate this problem.

Based on the fact that the system discussed above with a fixed order size involves continuous accounting of balances to determine the order point, and also a possible large number of controlled item items complicates mathematical calculations, it is clear that the absence of an information system that provides automatic calculation of indicators will significantly complicate the high-quality execution of the task on inventory management and will not allow the financial director to exercise operational control over the amount of working capital diverted in inventory.

So, for example, at the Myasprominvest company, the financial department is allowed to control warehouse inventories using the 1C: Trade Management 8 software product. Based on XYZ/ABC report sales analysis, a group of stocks falling into category A is determined for which it is necessary to carry out rationing. For this category, the tool provided by the program is used Planning by order point: Based on calculated data on safety stock, current warehouse balances and planned deliveries of goods, a report is generated with recommendations for the purchase of goods, on the basis of which control of purchases and payments is carried out.

The considered example of one of the Russian enterprises and the description of general methods for solving the problem of calculating inventory sizes are intended to help a large number of financial directors develop their own approaches to this topic.

Inventory turnover ratio K zap measure the average speed of movement of a company's inventory:

TO zap = .

The numerator of the formula is more consistent with the indicator characterizing the use of inventories, since the cost of production includes material costs.

Sometimes the calculation of the inventory turnover ratio includes not the cost of goods sold, but sales volume, which makes this ratio less accurate, since sales volume includes gross profit in addition to cost.

The most accurate calculation will be when only material costs are included in the numerator. But such an item is not available to an external analyst, so it is replaced by the cost of goods sold, the value of which can be found in the income statement.

In cases where information on the cost of sales is also unavailable, the sales volume indicator is used for calculation, which makes it possible to calculate a modified inventory turnover ratio. The modified ratio can be used for comparative trend analysis, especially if it is used consistently and changes in gross profit are small.

The average amount of inventory is calculated by adding the amount of inventory at the beginning and end of the analyzed period and dividing the resulting amount by two. The average calculated value can be clarified by calculating average quarterly or average monthly inventory values.

When estimating inventory levels at a specific date (for example, at the end of the year), the inventory turnover ratio is calculated using the inventory balances as of that date as the denominator. The analyst must also examine the inventory composition and make necessary adjustments (for example, from LIFO to FIFO).

Inventory turnover is affected not only by the efficiency of their management, but also by the industry characteristics of the business (Fig. 2.5).

Another turnover indicator useful for assessing purchasing and production policies is inventory turnover period T zap (Fig. 2.6):

T zap = .

This coefficient shows the number of days it took the company to sell the average amount of inventory in the analyzed year (Fig. 2.6).

An alternative calculation of the inventory turnover period is carried out using the formula

T" zap = .

Here the indicator reflects the number of days required to sell the inventory recorded in the balance sheet at the end of the year. The denominator of the coefficient is calculated by dividing the annual cost of sales by the length of the year in days:

.

We will show all the calculations of inventory turnover indicators using an example.

The following information is given (in thousand rubles):

Inventory turnover ratio

TO zap = .

Inventory turnover period

T zap = 360: 4 = 90 days.

To alternatively calculate the turnover ratio, it is necessary to determine the cost of average daily sales:

1200: 360 = 3.3 thousand rubles.

The inventory turnover period calculated by the alternative method is 120 days (400: 3.3).

Turnover ratios are measures of both the quality and liquidity of inventory. The inventory quality indicator characterizes the company's ability to use and sell inventory. When inventory is expected to be sold to pay off a debt, the cost of inventory replacement becomes the subject of analysis. In the normal course of business, inventory is usually sold at a profit. Therefore, the value of the standard gross profit is important, since the cash from the sale of inventories available to pay off current liabilities includes both the cost of inventories and profit.

When analyzing inventories from the point of view of their sales, income should be adjusted by the cost of selling inventories. But at the same time, it must be recognized that a functioning company does not use reserves for

repayment of current liabilities, since a serious decrease in their normal level may lead to a reduction in sales volumes.

When inventory turnover declines and falls below the industry norm, it indicates slow inventory movement due to obsolescence, low demand, or unsaleability. In these conditions, the question arises about the company's ability to cover the costs of maintaining these reserves.

In further analysis, it is necessary to identify why the decrease in inventory turnover occurs: due to their increase in anticipation of sales growth, contractual obligations, price increases, work stoppages, lack of raw materials or other valid reasons. The analyst should also be aware of inventory management practices (such as just-in-time systems) that encourage keeping inventory levels low by integrating them into a single system for ordering, production, sales, and distribution. Effective inventory management increases inventory turnover.

The quality of inventory turnover analysis can be improved by calculating turnover ratios for each inventory group, i.e., raw materials, work in progress, and finished goods. Turnover ratios by inventory group provide more accurate conclusions regarding the quality of inventory as a whole. We should not forget that inventory turnover is a combination of turnover ratios of different groups of inventories. One problem that hinders the analysis of inventory turnover ratios by group is the lack of necessary information. However, it can be found on the balance sheet.

Inventory turnover is also a liquidity criterion, as it characterizes the speed of their transformation (conversion) into monetary assets.

A useful measure of inventory liquidity is conversion period or operating cycle. This measure combines the period for collection of accounts receivable and the time required to sell inventory to obtain the time interval for converting inventory into cash.

To determine the conversion period, we use the calculation results of two previously considered independent examples:

Therefore, it took the firm 150 days (90 + 60) to sell the inventory on credit and then collect the resulting receivables.

The duration of the operating cycle of Krasnoyarsk companies is shown in Fig. 2.7.

When analyzing turnover ratios, one should consider the impact of alternative accounting methods on the assessment of the elements included in the calculation of these ratios. For example, two companies use the LIFO method to value their inventory, but their turnover ratios are likely to be incomparable because each company's inventory may have been purchased in different years at different prices. In addition, companies often have unusually low year-end inventory levels, which can push the turnover ratio to an abnormally high level.

Liquidity of short-term liabilities

Current liabilities are an important element of both working capital and the current ratio for two interrelated reasons:

– they are used in determining the adequacy of the safety margin, showing the excess of current assets over current liabilities;

– they are subtracted from current assets to determine the amount of working capital.

In terms of working capital and the current ratio, short-term debt, by virtue of the fact that it is subtracted from current assets, appears to be repaid, that is, liquidated at the time of calculation, although in fact current liabilities are essentially renewable.

Provided that sales remain stable, purchases and current liabilities will also remain unchanged. Increase in sales volume usually

leads to an increase in current liabilities. The dynamics and direction of change in sales are a good indicator of future current liabilities.

For the analysis of working capital and current ratio it is important quality of current liabilities. Not all current liabilities represent equally urgent payment requirements. For example, obligations for various tax payments must be paid quickly, regardless of current financial difficulties. It is known that the ability of state, regional and local authorities to collect debts is categorical. And if debt arises to suppliers with whom the company has long-term relationships, deferment and revision of debts during the financial difficulties of the payer are both possible and generally accepted.

The quality of current liabilities should be assessed by the degree of urgency of payments. It should be recognized that often the money coming into the account from current activities is considered as available to pay off current obligations, but it is forgotten that wages and similar expenses require priority repayment. Trade debt and other short-term debts are paid only after priority obligations have been satisfied.

During the analysis, it is also necessary to have information about unregistered liabilities that have claims on current monetary assets. Examples are contractual obligations and lease obligations. If there is a condition for accelerated payment on long-term loans, then refusal to meet current installments may lead to the implementation of the requirement to pay the loan as a whole.

Payables repayment period T kr, including current non-overdue obligations, is calculated using the formula

T cr = .

However, there is a difficulty in calculating this ratio: the financial statements do not contain information on purchases.

For trading companies, the approximate amount of purchases is determined by adjusting the cost of goods sold
(by the amount of depreciation and other non-cash costs included) and changes in inventories as follows:

Purchases = Adjusted Cost of Goods Sold + + Closing Inventory – Beginning Inventory.

If significant amounts of other cash costs are included in cost of goods sold in addition to material costs, this may reduce the accuracy of calculations based on approximate credit purchases.

Another useful indicator is accounts payable turnover K kr – calculated by the formula

TO cr = .

This ratio shows the speed at which the company pays for its purchases.

Inventory turnover ratio is an efficiency ratio that shows how efficiently inventory is handled by comparing the cost of goods sold to the average amount of inventory over a given period. In other words, it measures how many times a company sold during the year.

This ratio is important because total turnover depends on two main components of activity. The first component is purchase of shares. If a company has large amounts of inventory purchased during the year, it will have to sell more inventory to improve its turnover. If a company cannot sell more inventory, it will incur storage costs and other expenses.

The second component is sales. Sales must match inventory purchases, otherwise inventory counting will not be effective. This is why purchasing and sales departments must work closely together.

Definition

Inventory turnover represents a value that determines how many times a company's inventory is sold and replaced within a given period of time. To find out how many days it takes to sell equipment, you need to divide the sales volume by the average inventory value.

Inventory turnover ratios depend on the company, as well as the industries of development. Low-margin industries tend to have higher inventory turnover ratios as they offset lower profits from higher sales forecasts.

For all these reasons, comparisons of inventory turnover ratios tend to be most appropriate among firms within the same industry, and the determination of a "high" or "low" ratio should be made in that context.

Inventory turnover measures how quickly a company sells products and typically compares it to industry averages. Low turnover suggests weak sales and therefore excess inventory. A high ratio implies strong sales and/or deep discounts.

The speed at which a company can sell is a key indicator of business performance. It is also one of the components of calculating return on assets. As such, high turnover means nothing if the company is not making a profit on every sale.

Calculation and formula

The formula for calculating inventory turnover is as follows:

Kob.z. = TC / Mc.r., where

Kob.z.– inventory turnover ratio, TS– cost of products sold, Mc.r.– average annual cost of inventories.

Inventory turnover is calculated as sales divided by average inventory. Average inventories are calculated as:

(quantity at beginning of inventory count + ending inventory) / 2

Analysts divide the quantity of average inventory instead of sold inventory for greater accuracy when calculating turnover, since sales include a markup on cost.

In accounting, this ratio is calculated as follows:

Kob.z. = line 2110 / line average 1210

In general, low inventory turnover ratios indicate that a company is carrying too much inventory, which may indicate poor management or low sales. Excess inventory ties up a company's cash and leaves the company vulnerable if market prices drop. Conversely, high inventory turnover rates may indicate high sales and timely inventory counts.

High inventory turnover also means the company is quickly replenishing its cash reserves. An exceptionally high inventory turnover may indicate that the company is often making ineffective purchases and, therefore, losing some sales.

It is important to understand that the timing of the purchase of inventory, especially that made in preparation for special promotions, may slightly change turnover.

Different accounting methods also affect inventory turnover ratio. During periods of rising prices, using the LIFO method, turnover indicates a higher cost of goods sold and lower inventories than using.

In addition, companies using the LIFO method also have more stocks than FIFO companies. The LIFO method increases the cost of production, which reduces profits and, in turn, reduces tax liability. The cost of goods sold is reflected in income.

Average inventory can be determined as follows::

TZsr. = (TZ1 + TZ2 + … + TZn) / n-1, where

TZn- the amount of inventory for individual dates of the analyzed period (rubles, dollars, etc.), n— number of dates in the period.

Turnover in days:

Obdn = (TZsr * Number of days) / T, where

TZsr- average inventory, T— turnover for a given period or sales volume.

Turnover in times is determined using the following formulas:

Image = Number of days / Weekdays

Image = Turnover (T) / Average inventory (TZav)

Product inventory level:

Uz = (Inventory at the end of the analyzed period (TZ) * Number of days (D)) / Turnover for the period

The turnover rate is the expected number of times a product will be turned over in a certain period of time. Defined as follows:

Turnover rate = 12 / (f * (OF + 0.2 *L)), where

OF is the average order frequency per month, L is the average delivery period in months, f is a coefficient that summarizes the effect of other factors that may affect turnover.

Analysis

Inventory turnover is an indicator of how effectively a company can control the sale of its goods.

falls, That

1. There may be an increase in the amount of assets used.
2. There may be a drop in sales volume.

If the turnover ratio growing, That

1. Capital turns over faster, each unit of inventory brings more profit.
2. It may be artificially inflated when switching to using a rented OS.

The higher the company's inventory turnover, the more efficient production is and the lower the need for working capital to organize it.

A webinar on determining turnover is presented below.

So, let's consider all the aspects - theoretical and practical - that we need when working with product turnover.

What is turnover

There are many versions - this is “how quickly the product sells”, and “how many days do we sell stock”, “sales speed”... Indeed, approximately everything is so. But the exact definition of turnover is still the same: it is the ratio of the sales speed to the average inventory for the period. That is, to put it simply, this is how long it takes us to sell the average stock in our warehouse. How quickly we get back the money we invested.

The higher the turnover, the better. This is undoubtedly true. This means our money will come back to us faster. However, we must remember that if we sell our inventory too quickly, we risk running out of goods. Large inventories take away our working capital, and the company cannot develop. Small stocks force us to balance on the brink of a shortage - and we lose customers, we are forced to import goods every day and spend our money on logistics.

Which is better?

This is a strategic issue, each company solves it independently. Extremes are not helpful at all. Therefore, each company sets acceptable turnover rates for itself. Turnover is individual! This is the first.

Second. To calculate turnover you need to have THREE parameters:

1. Average (average!!!) inventory for the period. That is, how many goods do we have in our warehouse, for example, per month. Do not confuse with stocks for “today”! But this will be discussed below.

2. Period. It could be a week, a month, a year. Typically a month is the most used period. However, for perishable goods (bread, milk) the period can be equal to a week. The annual turnover can be calculated by the owner, manager, and assessing the efficiency of the company as a whole. However, for tactical inventory management it is usually worth using a month.

3. Trade turnover for the period. That is, the sales themselves for the same month (or week, or year). Important: we calculate the stock and sales of the SAME product (that is, you cannot take all the stocks of the “alcohol” group and compare them with sales of the “vodka” category)

What is important to consider when working with turnover are four important things:

Turnover is considered only where there are inventories. No inventory - no turnover (for example, a hairdresser sells services - haircut, manicure... There are no stocks in the warehouse for these services).

Only those goods that are physically present in your warehouse, those that are capitalized, are taken into account. If there is a product, but it has not been recorded or has already been written off, it is not considered. If the goods have already been purchased by you and are on their way to you, but have not yet arrived (the goods are on the way) - it is also not considered (for the simple reason that it theoretically may not arrive... or it may arrive, but in the wrong form... in short, this already logistics, and we all know that nothing can be assumed with it in advance). A product that you have already sold, but it has not yet been shipped to the client (for example, a wholesale and retail company sells the product in batches, receives an advance payment) cannot be considered either. It's already sold, it's turned around, so it doesn't count (unless you have the courage to sell it twice)...

Turnover is calculated in units of goods (for example, in pieces) or in monetary terms (for example, in rubles). Consider it whatever you want, it doesn’t matter, the essence won’t change. It is important that you consider both inventory and turnover in the same quantities. If you count in monetary units, then you need to count in purchase prices (both inventories and sales). Not in retail, but in purchasing - retail prices change more often, purchasing prices are usually more stable. However, if purchasing prices in your company also fluctuate greatly, then count in pieces.

turnover is needed in dynamics! By itself, taken out of context, it doesn’t say anything. Well, we have a turnover of 30 days... So what? Is this good or bad? Now, if it was 15 days, but became 30, this is a negative trend and measures must be taken. And if it was 60 days, and became 30, then everything is fine, and you can move further in the same direction.

In the future, when we say “turnover” and “turnover ratio,” we will mean the same thing - this is the number of turnovers in times or days of the average inventory balance for a certain reporting period. You can calculate turnover in days, you can in times, you can in pieces, you can in money, you can per month or per year, you can by product items, by categories, by brands, by suppliers, by stores... The question is what do you want to see .

If you need to evaluate the overall work and compare stores with each other, then you should take the annual turnover in rubles. If the question is what products should we remove from the assortment (who is the weak link?), then it is worth comparing product items within the same category (for example, Domik v Derevnye milk 3.2% fat and Parmalat milk 3, 2% fat) in pieces per week. So, let's deal with everything in order.

Average inventory

Very often, when calculating turnover, confusion arises here. Many people think:

a) not the average stock, but the stock for “today”. This is the level of inventory, and this method does not show turnover, but how many days are left until the end of sales, that is, “how long the cartridges will last.” You can also count, but this is a different parameter that does not reflect the dynamics.

b) average stock, but incorrect. Take the first day of the period and the last day and divide in half. This is incorrect because it does not reflect the dynamics of inventories throughout the month.

For example, this figure shows how the number of goods in the warehouse changed over the month. If we use the “pre-computer” formula, then according to it the average inventory will be equal to (10,000+10,000)/2 = 10,000 pcs. But this is not true, since during the month there were situations of both shortages and overstocking of the warehouse. If you calculate using the correct formula, then the average inventory will be 7,500 pieces (see example 1 below).

The correct formula for calculating average inventory is:

TZsr = TZ1 /2 + TZ2 + TZ3 + TZ4 + … TZn /2

TZ1, TZ2, … TZn - the amount of inventory for individual dates of the analyzed period,

n - number of dates in the period.

So, turnover is calculated in days or times. Let's consider both options.

1. Turnover in days shows how many days it takes to sell the average inventory. It is calculated by the formula:

About days = Average inventory * number of days / Turnover for this period

For example, the average supply of Tide washing powder for the month was 155 pieces. Sales of the same powder for the month amounted to 325 pieces.

Turnover will be: 155 pcs * 31 days / 325 pcs = 14.78 (15) days.

It takes 15 days to sell the average stock of this powder.

What is the conclusion for us? So far, none - you need to look at this indicator over time. Now, if last month the turnover was 10 days, but it became 15, then this is a signal that it is necessary to either reduce the quantity of imported goods or increase sales (or you can do both at the same time). And if, on the contrary, it was 20, but became 15, it means that the goods began to turn around faster, and this is good.

Another important criterion: the ratio of turnover in days and the credit line for this product. If the loan received from the supplier of this powder is 30 days, then the situation is more or less favorable: we return our invested money in 15 days, and the payment period comes in 30. That is, we can use the money received for two weeks.

But if the loan is 10 days long, then a turnover of 15 days tells us that to repay the loan we will have to use borrowed money, because we have not yet turned over the goods, we have not received money for it.

Turnover in days should never exceed the loan term!

Another conclusion that can be drawn based on turnover data. If the turnover is 15 days, this means that the stock must be replenished every 2 weeks (if desired, maintain some kind of safety stock). The turnover period is correlated with the frequency of deliveries.

2. Turnover in times tells how many times during the period the product“turned around”, sold out. Calculated using the formulas:

Turnover = Turnover for the period / Average inventory for the period

For example, the average supply of Tide washing powder for the month was 155 pieces. Sales of the same powder for the month amounted to 325 pieces. Turnover will be: 325 pcs / 155 pcs = 2 times a month.

The average stock is sold 2 times a month.

What's the conclusion? 2 times a month is the same as 15 days of turnover, so there is no fundamental difference in the calculation method. The same conclusions can be drawn. But in my opinion, calculating turnover in days is more convenient. In the future, here we will talk about turnover in days.

Not turnover

1. Let's consider what turnover is not, but is used in practice.

This is the level of product inventory (UL) - an indicator characterizing the supply of a store with supplies on a certain date. It shows how many days of trade (given the current trade turnover) this stock will last.

Utz = Inventory at the end of the analyzed period * number of days / Turnover for the period

For example, on July 15, there were 243 pieces of Tide powder left in the warehouse. For two weeks of July (from the 1st to the 15th) sales amounted to 430 units.

Utz = 243 pcs * 15 / 430 pcs = 8.4 days.

Available supplies will last for 8.4 days. This means that after 8 days you need to replenish the stock.

2. Another indicator that is confused with turnover is turnover.

Turnover - how many turnovers a product makes during a period. Leaving rate - how many days will it take for something to leave the warehouse?

If, when making calculations, we do not operate with the average stock, but calculate the turnover of one batch, then in reality we are talking about turnover.

For example, on March 1, a batch of 1000 pencils arrived at the warehouse. On March 31st, there are 0 pencils left in stock. Sales are 1000 pieces. It seems that the turnover is equal to 1, that is, this stock turns over once a month. But it is necessary to understand that in this case we are talking about one batch and the time of its implementation. One batch does not turn around in a month, it “goes away”.

To calculate inventory turnover, batch accounting is not needed.

3. In some works, yield is the return per square meter of retail space.

This is also an important indicator, which is calculated using the formula:

Attrition rate = turnover per month / Space occupied (m2)

Example 3. Comparison of indicators within the category “Washing powder”

From the table you can see that Bi-Max, despite its poor turnover (27 days), has the best sales per m2. It can be concluded that too large a quantity of goods was purchased. By reducing inventory, we will level out turnover.

But Tide has a good turnover, but sales per m2 are the worst among the entire category. We conclude that shelf space is being used ineffectively or the product is located in a “cold” area of ​​the sales floor. It is necessary to increase sales in general or reduce the occupied space.

Ariel powder, although turnover is not very good, shows acceptable yield. Here we can also talk about a decrease in stock.

What is the overall conclusion? The level of inventory and turnover (or return per square meter) also need to be considered, but they have little connection with turnover itself.

And one more conclusion - there is no uniform terminology in what we call performance indicators of a trading enterprise. Therefore, when meeting any definitions in books, at seminars, from colleagues or partners, be sure to clarify what exactly is meant by a particular term.

Turnover rate

They almost always ask the same question: “What turnover rates exist? Which is correct? There is no answer. Each company has its own standards.

The turnover rate is the number of days or revolutions in which the stock of goods must be sold, in the opinion of the company's management, so that trade can be considered successful.

Each industry has its own standards. Each region has its own standards. Each supplier has its own standards. Each type or category of goods has its own standards.

For example, a store selling stationery and toys on Sakhalin has an average turnover of 90 days (and that’s good)! For the same store selling the same thing, but in Moscow, this figure seems unacceptable.

But the fact is that delivery of goods to Sakhalin is extremely difficult and long, and the company is forced to have significant reserves to maintain turnover. This is the price of business... But the trade margin in Sakhalin, where there are practically no competitors, is at least 150%, which for Moscow seems like a pipe dream. This, excuse me, is the price of doing business in Moscow...

There is only one rule: the higher the turnover, the less time the goods are in the warehouse, the faster they turn into money.

But it is important to remember: if the turnover is too high - say, close to 1-2 days - this indicates that the supply of goods must be carried out daily and the store operates with virtually no safety stock. If there is the slightest disruption in supplies or an increase in demand for goods, we risk being left without goods! And a shortage for a retail enterprise is dangerous not only due to lost profits, but also because the existing demand for the product will be satisfied by a competitor... And also - daily deliveries are always problems with logistics. Acceptance, counting, posting of goods - each operation is fraught with the possibility of errors and losses. The more often, the more errors.

In the case of perishable goods (bread, milk), this situation cannot be avoided. But for other goods, it is more reasonable not to reduce the turnover to 1-2 days, but to work out for yourself an optimal period that minimizes risks and losses. This will be the turnover rate for a particular product.

Remember: what is the norm for one product will not be the norm for another! You cannot try to find a single standard for batteries and plasma TVs - these products have nothing in common. If you compare products by turnover, then this can only be done among products in the same category and comparable to each other. There is no need to compare bread with cookies. Beer with vodka too. But you can compare cookies from one factory with cookies from another factory.

Analysis of turnover measurement results

When comparing, you can build a “Turnover-Margin” matrix and see which products bring us more profit over the same period, and which bring us less.

For example, we want to analyze data for one category and find out which products in the category are most interesting to us and which ones are less interesting.

Table 4. Comparative data on margin and turnover

As you can see, product 5, although it has an average trade margin, has the best turnover of all and brings the greatest profit per month per unit of product. And product 1, which has a high margin, shows the worst turnover. Consequently, the monthly profit per unit of production is minimal. What can be done? It is necessary to find out what is causing such poor turnover - excess inventory or poor sales? After that, take action. If the problem is in sales, then stimulate turnover. If the problem is excess inventory, then you need to stop importing goods in huge quantities.

Matrix "Turnover-Margin"

By correlating two parameters - margin (or trade margin) and turnover, you can distribute goods within one category according to this matrix.

As you can see, the most interesting for us are products that have a high turnover and a high markup. The assortment may also contain goods with low turnover, but this must be compensated for by a high markup. Products with a low markup may be included in the assortment subject to conditions. That they have good turnover, that is, the company does not spend money on selling these goods. Products with low markups and poor turnover should not be included in the assortment.

If such products are present in the matrix, then we can do the following:

remove them from stock. However, “mechanical cleaning” is dangerous because we can “throw away” both the new product and the accompanying product, component or image product along with the illiquid assets. Therefore, before we “throw out” someone, we need to analyze the history of this product and understand its role in the overall assortment.

translate them into the “high markup-low turnover” square. You need to understand what kind of product it is that is selling slowly. Perhaps this is an expensive image product, and we simply positioned it incorrectly and are not making enough profit. translate it into the “low markup-high turnover” square, stimulating sales or reducing the amount of inventory. After all, we have two pedals: “gas” (sales speed) and “brake” (reducing inventory). Unlike a car, we can press both pedals at once?

Sometimes it happens that we have to put up with the fact that we have poor turnover for some goods and this is not the fault of the buyer or sales. These are conditions that cannot be adjusted.

This is usually due to delivery conditions - for example, the supplier goes on vacation (closes the plant for maintenance for two months) and in order to provide the company with supplies, it is necessary to purchase a two-three month supply. Or the delivery of goods takes so long (for example, a container by sea from China) that to ensure uninterrupted supply it is necessary to purchase goods in large quantities. In this case, you need to understand that this is the price of business... In this case, you need to try to compensate for your costs of maintaining inventory with loans from suppliers.

Explanation of the indicator

Inventory turnover (English equivalent - Inventory Turnover, Times) is an indicator of business activity that indicates the effectiveness of inventory management in the company. The value of the indicator indicates the number of turnovers that the inventory made during the year. It is calculated as the ratio of the cost of production and the average annual amount of inventory.

An effective inventory management policy means that the current level of inventories, work in progress, finished goods and other things ensures the uninterrupted process of production and sales of goods and services, but at the same time a minimum amount of financial resources is diverted to finance inventories. If the operational process is smooth, but the inventory level is significant, then the company's costs will increase. It is necessary to pay the rent of the premises in which inventories are stored, make interest payments on funds raised for the purchase of excess inventories, etc.

Standard value of inventory turnover:

According to the Rosselkhozbank methodology, the following value is considered normative:

Table 1. Standard value of the indicator by field of activity, once a year

Source: Vasina N.V. Modeling the financial condition of agricultural organizations when assessing their creditworthiness: Monograph. Omsk: Publishing House NOU VPO OmGA, 2012. p. 49.

In the process of drawing conclusions, it is worth remembering that for a particular business segment, standard values ​​may differ significantly. It is necessary to compare the indicator with the value of the main competitors. It is also necessary to consider it in dynamics - a constant increase in turnover indicates that there is a steady improvement in inventory management policy.

Directions for solving the problem of finding an indicator outside the standard limits

In short, the inventory management policy should ensure the continuity of the production and sales process. To do this, a stock is formed that will ensure production and sales between delivery periods. A safety stock is also created in case of unforeseen events. Technological inventory is taken into account if the company cannot immediately use the inventory in production, but must still prepare it. It is also worth considering the seasonal factor. The sum of all these reserves forms the optimal inventory size. It is worth calculating the indicator separately for each type of inventory. If the current volume of inventories exceeds the optimal one, then it is advisable to reduce it, which will free up some of the financial resources. If the current level of inventory is below optimal, then there is a risk of stopping the production and sales process due to a lack of resources.

Formula for calculating inventory turnover:

Inventory turnover ratio = Product cost / Average annual inventory cost (1)

The average annual value of inventories can be calculated in several ways, depending on the information that is available in the analytics.

Average annual inventory (most correct method) = Sum of inventory at the end of each working day / Number of working days (2)

Average annual inventory (if only monthly data is available) = Sum of inventory at the end of each month / 12 (3)

Average annual inventory (if only annual data is available) = (Beginning of year inventory + End of year inventory) / 2 (4)

Example of calculating inventory turnover:

Company OJSC "Web-Innovation-plus"

Unit of measurement: thousand rubles.

Inventory turnover ratio (2016) = 793/ (65/2+69/2) = 11.84

Inventory turnover ratio (2015) = 834/ (69/2+77/2) = 11.42

Thus, it is impossible to draw an unambiguous conclusion about the effectiveness of inventory management of OJSC Web-Innovation-plus. On the one hand, inventory turnover increased from 11.42 to 11.84 turnovers per year. However, on the other hand, there is a constant decline in the level of production and sales. This may be due to insufficient inventory, which leads to disruptions in the operational process. To form accurate conclusions about the effectiveness of inventory management, it is necessary to conduct a more detailed study.