Most merchants know that busy sales periods like the holiday season or promotional periods are often followed by a sales slump. Without proper planning, this can mean lots of excess stock on the shelves, poor cash flow, and a myriad of other consequences.
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However, with smart planning and forecasting, you can be fully prepared for a downturn in sales, and sometimes even avoid a slump altogether.
A poor sales period can have a domino effect that can be detrimental to businesses if not planned for properly. Some of the consequences include:
Loss of profits – The most obvious impact of a sales slump is less profit flowing into the business due to fewer sales.
Poor cash flow – Without a steady stream of profit, there’s likely to be a decrease in the amount of cash available to put towards operational costs, bills, etc.
Excess inventory – If you’ve continued ordering stock at the same rate as you did during the busy period, you’ll be left with a surplus of unsold inventory sitting on the shelves.
Increased inventory holding costs – Having too much inventory on hand means paying to hold the stock you don’t need.
Increased operational costs – If you’ve neglected to scale back resources like staff after the busy period ends, you’ll be left paying unnecessary operational costs.
Just as you should plan for seasonal sales periods, it’s equally important to prepare for slow periods so that you can scale back when you need to. And, with the right approach, you can lessen the severity of a downturn in sales, or avoid one altogether.
Here are a few things to consider:
Work smarter – When a busy season is drawing to a close, it’s time to start scaling back so you can continue to run your business efficiently even though sales may have declined. This means reducing purchase order amounts, cutting back staff and other resources, and reducing warehouse space if necessary.
Use free time wisely – Now that you don’t have to focus so much on fulfilling large volumes of sales orders, you’ll have more time to plan for the future. Revisit your sales and inventory forecasts to plan for upcoming periods, and think about ways you can improve and grow your business over the long term.
Ramp up promo efforts – It may be a “slow period,” but there’s no reason you can’t continue to attract customers, so think about ways you can bridge the gap with promotional efforts. Consider introducing product bundles or discount codes to encourage sales.
Whether you’re planning for a busy period or bracing yourself for a sales slump, accurate sales and inventory forecasting is crucial to running your business efficiently year-round.
By using data and reports generated by your inventory management system, you can make Quarter-on-Quarter and Year-on-Year comparisons to forecast inventory and ensure you have an appropriate amount of stock on hand at any given time. You can also accurately predict what sales will look like at any time of year – giving you the insights you need to plan intelligently.
TradeGecko’s inventory and order management software will help you prepare, forecast inventory, and maximize sales.
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