Wholesale & Distribution
Companies involved in wholesale trade and/or distribution of goods have three critical financial concerns and Delucchi, Hawn and Company has over 40 years of extensive experience dealing with these issues. Those critical areas are; Inventory, Accounts Receivable and Cash Flow. Now let's look at the specifics.
Inventory - is the greatest concern. Too little inventory leaves you unable to serve the customer. Too much inventory can eat up all your profits. A constant analysis of each inventory item must be done to insure adequate quantities on hand, of slow moving merchandise to avoid the problem of maintaining excessive merchandise on hand. Each day an inventory item sits on the shelf it is costing you money In addition, the excessive inventory ties up your company's cash that could be used to buy other inventory items. Our firm is very familiar with these problems and is able to help devise methods and procedures to analyze and control inventory flow.
Accounts Receivable - is important for all companies but in this industry accounts receivable is critical. Any time receivables are beyond a given number of days outstanding, it is costing your company money. Receivables are the opposite of the cost of money for inventory. By collecting receivables, merchandise can be purchased. By purchasing merchandise, inventory can be turned. Accounts receivable and collection procedures and policies must be instituted to insure a rapid turnover of accounts receivable and an adequate amount of capital to maintain the inventory.
Cash Flow - is directly effected by accounts receivable collection and the acquisition of inventory. If cash flow is controlled, companies can take advantage of discounts. Merchandise acquired for inventory, quite often is sold with a series of discounts available. The proper utilization of these discounts can produce substantial amounts of additional income. Remember, any purchase that has a 2% discount, whether it be net 10 or net 30, can be multiplied by the number of days to produce the effective interest rate this represents in terms of borrowing. Thus, a 2/10, net 30 invoice results in a 24% interest rate on the money borrowed, 24% is the rate of interest paid to offset the discount taken.
In addition, your company needs to retain sufficient capital to grow the business. You need to produce the least possible amount of taxes to conserve cash and provide sufficient working capital for a healthy, successful business.
Delucchi, Hawn & Company stands ready to assist in these as well as many other areas, and offers you the expertise and experience to do an outstanding job.