Alberta is in an unprecedented economic time. The impact of the COVID-19 crisis on the energy and other sectors is already rippling out, and individual businesses are facing a perfect storm of money-sucking problems.
We talk a lot about how to cut the deadly wastes to save money. Over the next couple of months, we’re re-doing our “Deadly Waste” articles—but we’re taking it up a few notches to help you adapt to this storm.
The cost-saving ideas in these articles may be uncomfortable, but growing pains can hurt even when we know it’s for the best. We hope this helps.
It feels reassuring to carry enough inventory to last a while. You can relax about not having to scramble to source the next shipment if an order comes in.
However, excessive inventory also ties up our cash flow more than any other Deadly Waste. Every piece of inventory, whether it’s to resell, manufacture, or use in-house is an ice-cube with your money frozen inside. The only way to thaw it and get at the cash is to sell it.
Times like these aren’t comfortable, and they aren’t the times to sit on a hoard of inventory like a dragon on its gold. Now is the time to have as much liquid cash as possible.
Find Old Inventory
We know the places in our businesses where inventory goes to die. It could be the back corner of a warehouse, a trailer at the end of the worksite, or a closet down the hall.
Hunt down those places. Walk every step of your business and discover the materials you had forgotten you had. If they’re consumer goods, you can sell them at a discount. If they’re usable goods, go ahead and get them into your pipeline.
Chances are, you paid for that inventory a year or more ago, so any cash you can pull out of them now is a bonus. Think of it like finding a 20 in your pocket.
This is the time to scour the grounds of our businesses for any help they can give us. An empty shelf that has injected a little more liquidity into circulation is always better than a full one.
You’re not the only one hurting. The economic pain that Alberta is feeling now is near-universal. That means consumers are buying less, and wholesalers are selling less.
Remember that we’re all in this together, and you’re not the only one in survival mode. Few are aiming for big profits anymore; we’re all just trying to clear some inventory and struggle our way to liquidity.
Close to the Rocks
It’s the time not just to be close to the rocks, but for your rudder to be inches away from them. Reduce your shipment sizes and bring them in more frequently if you need to. Stay as liquid as possible.
If you manufacture, it’s the ideal time to switch from a “push” to a “pull” system, so you’re not producing what might not sell. The trajectory of where this crisis is going to lead us is still unfolding, so caution is the safest road.
While you’re at it, look at how you can streamline the process of manufacturing that widget or processing that file. Is there anything you’re doing that doesn’t need to be done? Any cinch to the flow will make it easier to flip to a pull system, which, in turn, will help keep your inventory in check.