The case of the disappearing stock…

David HollandTips & InspirationLeave a Comment

Warehouse stocktake image

Walking through the factory, being guided by the Operations Manager, I asked to see the stock sheet…

“What, the raw material stock…?”

No – the Work in Progress Stock…

He looked a little feint and started shuffling his feet, looking for the exit…

In manufacturing, accounting and any business that has activity that has attracted costs but has not yet been invoiced, there’s a figure called WIP that is included in the Management Accounts in an attempt to smooth out the reported profitability of the business where the invoicing pattern does not reflect the pattern of activity and production…

However, WIP evaporates over time, a very short time in my experience…

In this case – and I knew this because the WIP had been increasing each month in the P&L reports – the stock had been overstated to massage the reported margins so the Manager hit bonus…

Work in Progress image

But the WIP was not there it had disappeared through the cracks of inefficiency, poor productivity, bad leadership and sloppy management.

What had to happen this month was the WIP had to be written off – depleting the reported sales, crashing the profits and somewhat upsetting the CEO…

Rule No 1 – WIP Stock is easy to lose control of…

Rule No 2 – Do away with it unless absolutely necessary…

Rule No 3 – Have an Aged WIP Report to hand…

At this company, the write off was equivalent to 6 weeks Sales – so we ended up with a “negative sales figure” for the month, a big adjustment and a whacking great loss for the period. Of course this wasn’t a true reflection of the period, but we had to make the adjustment somewhere so we decided to take the hit in one month…

Be careful and vigilant with your Stock – of all types and flavours – it’s an easy place to lose money really fast…

Join me for your weekly fix of Business Tips and Inspiration to brighten your day and help keep you on track…

Each week, I’ll be sending you an email with a Story, a Case Study an Idea, Strategy, or Tactic you can use in your business…

There’ll be a few special offers, links to resources, and downloads for you too – all intended to add value to your day and strength to your Balance Sheet...

So, simply fill in the form here

…and we’ll make sure to get you on the list…

David Holland MBA, Business Coach and Trainer
David Holland MBA, Business Coach and Trainer

Would you like to book a FREE Strategy Call with me to discuss your business, opportunities, strategies for growth and more tips for success…?

Simply use this link , select your time slot from my schedule and we’ll have a conversation about your business, and if we both feel there’s value in working together, we can discuss working together too…

Leave a Reply

Your email address will not be published. Required fields are marked *