![]() The more times you run this machine, the more profit you generate. ![]() Retail is a money machine where you turn capital into inventory, and inventory into sales. In the meantime, good luck crunching those numbers.This post is by Fabricio Miranda of Flieber. ![]() Get in touch with MAX Digital today to schedule a product demonstration about any of our solutions. From MAX BDC to MAX Ad & Syndication and MAX Digital Showroom, MAX can help you merchandise and share all the value of your vehicles to get more customers in store. One of the strongest levers for helping your inventory to sell is making sure that your vehicles are visible and front line ready. Jasen Rice, owner of Lotpop, sums it up simply, “Sell what you carry and carry what you sell.” Moving your inventory with better merchandising Specialty cars may have to have a lower turn number, while higher volume dealers may be able to maintain a higher turn. While every dealership will have a number that works for them, 12 turns or holding 30 days of inventory is the gold standard. Inventory Turn Ratio should be looked at as part of an overall scorecard including profitability. If you want to see how your most recent month is tracking, you can simply take the beginning inventory value of the most recent complete month plus the ending inventory value of that month divide by two or use the calculator below to get your most recent Average Inventory Value.Ĭalculate! What’s a Good Inventory Turnover Ratio? The general formula for Average Inventory Value is: Average Inventory Value = (Sum of Inventory Values for Time Period / number of Values). To get your Average Inventory Value just add the end of month inventory value number for the last 12 months and divide by 12. Now that you have a Cost of Sales, also known as Cost of Goods Sold value you are ready to calculate the Average Inventory Value. If you are trying to look at Cost of Goods Sold for a full year using this method, you can take the beginning inventory value one year ago, add the value of all new inventory received during the year, subtract the value of your current inventory left on the lot to get the cost of goods sold over the last 12 months. See the formula below.Ĭost of Goods Sold = Beginning Inventory Value + Value of Any Inventory Purchased during the period – Ending Inventory Value Your Total Retail Sales-Front End Retail Gross=Cost of SalesĪnother way to calculate your Cost of Goods Sold, is to add the total value of your beginning inventory, plus inventory purchased and subtract any inventory that remains to be sold. If it’s not, take your Retail Sales for the time period, minus your front-end retail gross and that equals your Cost of Sales. At many dealerships, a Cost of Sales number may already be calculated for you. Your Cost of Goods Sold or Cost of Sales is the total value of all the inventory you sold in the given period. In automotive, your Cost of Goods Sold, may be labeled “Cost of Sales” on financial documents in dealerships. Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory Valueĭon’t know your Cost of Goods Sold or Average Inventory Value? Help is here. ![]() The ratio is typically used to help you understand the number of times your inventory fully turns over in a year, said differently it’s the number of times you would need to purchase the average inventory you hold per year. Given that it’s expressed as a ratio, finding your inventory turnover is a matter of doing some basic math. Right now, you are asking yourself, “How should I calculate my inventory turnover ratio?” How to Find Your Inventory Turnover Ratio Maybe even on a smaller timescale than that, and this goes for your new and used vehicle inventory.Īnd when you look at inventory turnover, you may be wondering “How can I improve my merchandising and inventory turns?”īut that’s jumping ahead. ![]() You’re looking at annual inventory turn, quarterly, monthly. You and your sales managers probably spend a lot of time considering your inventory turnover. Dealers have also changed how they make business decisions, too. People don’t shop for cars the same way they did a few years ago, and dealerships don’t sell cars the same way (or at least they shouldn’t). The automotive retail business has changed a lot in recent years. ![]()
0 Comments
Leave a Reply. |