Written by: Nithin Narayanan.
One of the main tools of retail finance is the Financial Merchandise Plan. A financial merchandise planning specifies which products or services are purchased, when it is purchased and how many products are purchased as mentioned in the earlier article. Both rupee and unit controls are employed here.
Rupee control refers to the total inventory investment the at the retailer makes during a specified time. Unit controls relates to quantity of merchandise handled in the specified time. Rupee control precedes unit control as investment should made first to buy merchandise.
Financial Planning thus has many advantages.
It controls the amount and value of inventory in each store or department.
It states how much of merchandise can be purchased with the budget in hand.
It allows the retailer to know the total inventory against planned and actual sales.
It can determine the space requirements that the retailer may need to stock as well as display.
It can classify the slow moving items.
Retail finance is a complex process. Retailer typically has different information needs. Retail assortments are larger; cost cannot be printed on cartons unless it is coded as customer might see it; sales are frequent and due to all these factors retailer needs monthly profit data and not quarterly. Daily Sales Report (D.S.R) is made to keep tab on all the activities of the store which culminates to monthly repots.