Guidance notes * Compare the value of supplier invoices to the corresponding value of your purchase orders. Use at least one full month's data * Keep a record of any order amendments due to price differences between your purchase orders and supplier' acknowledgements for at least one month * Add together the total monthly variances on invoices and acknowledgements * Multiply the combined variance by 100 and divide the result by the total value of invoices in the period Click here to see some examples.
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Pricing is one of the most complex areas of furniture retailing. Selling prices based on inaccurate supplier price catalogues then goods can be underpriced reducing sales turnover and profit. Example 1 Example 2
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* Include all sales of furniture and other interiors product lines sold by your company * If you have more than one store include sales from every store * Do not include VAT (to remove VAT from your sales figure divide it by 1.175) * If you have sub-let store space to franchisees, do not include their sales or rents they pay to you
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All of the retailer case studies conducted by Corridor so far have been based in the UK. Sales turnover of the firms studied ranged from £500,000 per year to over £100m per year.
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To calculate your gross margin multiply your 'cost of sales' by 100, then divide the result by your sales turnover Try to take all rebates and discounts into account Exclude VAT from both your sales and 'cost of sales' figures (to remove VAT from your sales figure divide it by 1.175) Do not include any overhead elements such as staffing, premises, heat & light, etc.
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Example 1 An independant UK retailer operates two large stores with an emphasis on quality branded furniture. Their overall margin of 34% takes into account all promotion support and volume rebates. Example 2
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* Use the sales value of cancelled orders rather than the number * Most back office systems can tell you the value of orders cancelled during any given period * Make sure the figure excludes VAT * Your cancellation rate is the value of cancellations times 100, divided by your sales during the same period * Use as long a period as possible as cancellation rates can vary widely on the short term
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Example 1 An independant UK retailer operating two large stores found that about a quarter of all cancelled orders and allowances were caused by late delivery or shipping errors. Example 2
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* Count the number of purchase orders you place in a full year * Include orders for stock replenishment, display items, bulk orders, etc. * Multiple orders for a single customer should all be included in the count * Exclude any orders for overhead items
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Example 1 An independant top brand retailer finds that because of the vast range of finishes and opetions on offer goods it sells are purchased for specific customers. It places 10,000 orders a year each of which has to be carefully checked and priced. Example 2
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* Ask each of your sales people how much time they spend on admin and order chasing * Express this as a percentage (e.g., an hour per day is roughly 13%) * Add together all the percentages and divide the result by the number of sales people * This is the average percentage time spent on admin by your sales staff
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Even large retailers with full time back office administration staff find that their best sales people spend much of their time checking orders and chasing suppliers. If this time could be spent helping customers then sales (and motivation) would increase. Example 1 Example 2
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Assess the number of hours spent each week by each member of staff on admin tasks (irrespective of whether that is their only or main job) Add together all the time spent and divide it by the number of hours worked by full-time employees per week This is the number of 'full time equivalent' employees to enter
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A huge amount of effort is required to keep a modern retail business running smoothly. This includes maintaining accurate pricing, sourcing new products, placing and chasing purchase orders, and processing supplier acknowledgements and invoices. Example 1 Example 2
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IMPORTANT: The results calculated by this programme have been based on a series of case studies carried out by Corridor and are provided for illustration only. The results assume full integration with your existing back office systems and adoption by all of your major suppliers.
The information you supply is used by your computer to calculate the potential benefits for your business and will not be saved or used in any other way.
