Hardware Retailing

SEP 2017

Hardware Retailing magazine is the pre-eminent how-to management magazine for small business owners and managers in the home improvement retailing industry.

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HARDWARE RETAILING | September 2017 46 The Challenge George Hazelbaker had only been working as a manager at the Burns Do it Center in Clovis, New Mexico, for a few years before he started seeing the ghosts. "I started noticing a lot of discrepancies in the inventory, or what I call 'ghost items,'" says Hazelbaker. "There were items that were not correctly accounted for in the POS system." Items were appearing on the store's inventory records that were not actually on the shelves. Most of them had appeared during the company's recent acquisition of another hardware store in town. Burns Do it Center includes three locations in New Mexico, in Clovis, Raton and Tucumcari, and one in Texline, Texas. In 2012, just before Hazelbaker took a job with the company, the owners acquired an existing hardware store in Clovis. The change was major. The Clovis Burns Do it Center, formerly a 10,000-square-foot store, relocated to the 20,000-square-foot sales space that previously housed the newly acquired business. The owners also purchased the store's existing inventory. To complicate matters, inventory records were stored on a POS system that was different than the one Burns Do it Center used. "That's when the problems arose, when we started merging the inventory," says Hazelbaker. "A lot of the inventory in the store we purchased wasn't properly accounted for." Integrating the numbers from two different POS systems meant the details associated with each item, such as the unit of measure, needed to match up with the new system. Much of the time, that integration process worked—other times, it didn't. By the time the dust had cleared and the merger was complete, the value of the inventory at Burns Do it Center increased by 250 percent. The increase might seem expected, given that the business had doubled its footprint. Total inventory numbers were still in line with overall industry averages. But not everything was as it seemed. Hazelbaker began noticing discrepancies, often in the units of measure the POS used to record an item. "For example, some of the wire we sell by the foot, but some of that wire was in our system as if we were selling it by the spool," he says. "So according to our records, we had 250 spools of wire in our store!" It's important to have an accurate record of what's in the store, but for Hazelbaker, overvaluing the inventory held another more significant threat. A large increase in inventory meant a larger tax bill. "When you have an increase in the valuation of your business, the government sees that as income." The store's tax bill was thousands of dollars more than it should have been. Inflated Inventory Value At Burns Do it Center, a standardized system for ordering and receiving has improved the accuracy of the inventory records. Numbers to Watch Inventory Turnover Sales to Inventory GMROI

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