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Warehouse management: uncompromisingly efficient.

Warehouse management that gives your success a boost.

No business without a warehouse: In retail companies, the warehouse plays a central but often underestimated role. It is the invisible pillar that holds everything together. But what happens if the warehouse does not function optimally?

A missing warehouse – fatal consequences

Warehouses must be well managed in order to serve customers quickly and deliver goods.

Too much stock is just as bad as too little. Too much stock ties up valuable capital. Products become obsolete, suffer damage and may have to be written off.

Effective inventory management – the key to success

It is therefore important to find a balance. Complete and correct inventory management is essential for this. Errors must be identified and rectified quickly.

Correct inventory management not only has a positive impact on customer satisfaction. It also improves:

Transparency:

  • The service team can competently inform customers about order processing and delivery dates.
  • Reliable information gives the customer a good feeling. The image and customer loyalty increase.

Efficient decisions:

  • Thanks to correct and seamless inventory management, the purchasing department gains an overview of stocks, even across branches.
  • They can optimize orders in terms of timing and delivery conditions.

A feel for trends and profitability:

  • Some industries experience constantly changing trends. The fashion industry is a well-known example.
  • Precise inventory management helps to recognize and react to changing customer behaviour at an early stage.
  • In this way, sales opportunities can be exploited and customer wishes fulfilled.

Speed and efficiency:

  • Correct inventory management helps to optimize processes.
  • Accepting an order, searching for products, putting missing goods on hold – all this takes time and increases the error rate.
  • Teams that know what is in the warehouse can improve the order sequence.

Software from a single source – the optimal solution

The demands on inventory management are high. This is why medium-sized companies today use ERP systems almost without exception. They also often use supplementary software or Excel sheets. This combination can lead to errors and time-consuming data evaluation.

Integrated systems, on the other hand, have an advantage:

  • They enable standardized data preparation and evaluation.
  • They make it easier for employees to familiarize themselves with the system logic.
  • The cost of introducing supplementary systems is low.
  • Data migrations can be avoided.

Inventory 365: The perfect complement for Microsoft Dynamics Business Central

Inventory 365 is one such system. It integrates seamlessly into Microsoft Dynamics Business Central. The solution enables simple and convenient reconciliation between the item movements in the warehouse and the G/L account postings for current assets in financial accounting. The system recognizes the differences automatically. This allows errors to be rectified quickly. An extended posting matrix provides additional transparency in the income statement and balance sheet.

With Inventory 365, you can optimize your inventory management and create the basis for efficient processes, satisfied customers and sustainable success.

Find out more about efficient warehouse management and attend one of our upcoming webinars to learn more about our solution.

Click here for information and to register.

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Valuation of inventories in retail: How to manage risks and optimize your balance sheet

Uncover hidden potential and minimize risks – with the correct valuation of your products and goods. The balance sheet shows a company’s assets and liabilities as at a specific reporting date. It is part of the annual financial statements and serves to inform internal and external interest groups. The balance sheet can be used to assess the financial situation and development of the company.

The balance sheets of trading and service companies differ considerably. This is mainly due to the inventories that trading companies hold in their salesrooms and warehouses. Goods in transit (“floating goods”) must also be included in the annual financial statements.

In practice, the valuation of inventories proves to be extremely complex. Below you can see the most important valuation categories that have a direct influence on the valuation.

Categories at a glance: How to value your inventories

Limited shelf life
Whether food or products from perfumery and cosmetics: many goods and products only have a limited shelf life. At the time of accounting, they must therefore be written down to their expected selling price. The loss in value is recognized as a write-down on inventories in the income statement.

Fluctuating prices
Fluctuating energy prices are a recurring topic of discussion. Food prices also fluctuate, depending on weather conditions, harvest volumes and demand.

In accordance with the lower of cost or market principle, goods with strongly fluctuating purchase prices must be recognized at their lowest possible value on the balance sheet date. There is a choice between the purchase price and the current market price. Depending on the price development, there is a devaluation and value adjustment. This is recognized as an expense in the income statement.

Degree of realizability
Whether household goods, books or clothing: Products can be damaged during transportation, storage or presentation. This reduces their value.

In retail, goods are generally categorized into A, B and C goods:

  • A goods are fully functional and marketable. They are recognized at full value.
  • B goods have slight defects. However, they are still marketable and are recognized at a discount corresponding to the reduction in value.
  • C goods have significant defects or damage. They can only be sold at a discount or as spare parts. They are recognized at their residual value.

Storage period
“Slow-moving items” are products that remain in stock for a long time. They represent a risk for retailers, as they tie up capital and run the risk of being damaged. In this case, they can no longer be sold at their full value.

On the other hand, there are “fast-moving items” that only need to be stored for a short time thanks to high demand. The risk of loss of value is low. They represent a low financial risk.

Sales risk
Specialty items have a high sales risk. Demand fluctuates, which is why they are difficult to sell.

Ventilators, for example, were in high demand during the pandemic. In the meantime, many facilities have covered their needs for years. Goods like these may have to be devalued.

In contrast, standard items have a low sales risk. They are easy to procure and sell and can therefore be recognized at their full value.

Additional categories:

Seasonal items
Christmas, Easter or carnival items are valued at their market value on the balance sheet date. If they are difficult to sell after the season, they must be written down.

Trend articles
They are particularly well known in the fashion industry: trend items that are often only on sale for a short period of time. A hype is followed by a sharp drop in demand.

As long as the trend continues, trend items can be recognized at their full value. If the trend subsides, they must be devalued.

As you can see: According to the lower of cost or market principle, goods and products must be recognized at the lower fair value. This initially simple-sounding rule proves to be complicated and extremely complex in practice.

Warehouse valuation with “Valuation 365”

Our “Valuation 365” app for Microsoft Dynamics Business Central makes life much easier for retail companies. The advantages:

  • Automation of the valuation
  • Reliable compliance with the lowest value principle
  • Flexible adaptation to individual needs
  • Improved transparency
  • Increased accuracy
  • Reduced risk of errors
  • Improved decision making

Visit one of our upcoming webcasts and see for yourself how “Valuation 365” can simplify, accelerate and refine the valuation process in your company. To the information and registration.

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Valuation: How it affects financial reporting

Inventory valuation has a major impact on financial reporting in retail companies. It affects the balance sheet, the profit and loss account and other key financial figures.

In this article, you will learn how to ensure accurate inventory valuation.

Inventory valuation: effects on the balance sheet

The balance sheet profit is calculated from the difference between assets and liabilities. The items in the warehouse count as assets. If they are valued as high as legally possible, the total amount of assets and therefore the profit increases.

A high asset value is an indication of a financially stable situation in the company.

Example

A trading company estimates the value of its goods in stock at EUR 12,000. However, a precise valuation leads to a correction. The total value is EUR 14,000. The company’s financial situation is therefore better than expected.

Stock valuation: effects on the profit and loss account

Stock valuation also has an impact on the profit generated from sales. Low costs on the goods side cause profits to soar. Correspondingly, the profit decreases when costs are low.

Example

A trading company sells goods worth EUR 20,000. It estimates the cost of goods sold at EUR 10,000. The profit is EUR 10,000.

An audit reveals that the cost of goods sold is actually only EUR 8,000. The profit therefore increases to EUR 12,000.

Further effects of stock valuation

Stock valuation affects other key figures and information in financial reporting, including the following:

Creditworthiness

Before funds flow, investors check the financial situation of a company. Stable finances are a sign of security. An accurate inventory valuation can help improve creditworthiness and investor confidence.

Compliance with accounting standards

Inventory valuation must comply with applicable accounting standards. Traceable accuracy contributes to compliance.

Identification of obsolete stock

Obsolete stock must be written down or even written off completely. If they are included in the balance sheet at their full amount, the profit is unjustifiably high. Accurate stock valuation also helps to identify obsolete stock.

Example

A trading company has goods worth EUR 1,000 in stock. However, the goods have expired and can no longer be sold. The exact stock valuation means that the goods have to be written off as worthless. The company’s profit decreases. At the same time, the tax burden is reduced.

Software support for stock valuation

Software supports retail companies in ensuring accurate stock valuation at all times.

The functions that software can offer include the following:

  • An optimal devaluation of assets in stock. This leads to a reduction in the tax burden.
  • Valuation according to the strict lowest value principle with a view to the criteria of marketability, age structure, expiration date or range. Individual value adjustments are also possible.
  • Efficient and robust valuation of stock values without Excel, and thus: Error avoidance and acceleration.
  • Meaningful documentation on the valuation of stock levels over time.

Tips for carrying out an accurate stock valuation

For an accurate stock valuation, we recommend that you

Use valuation methods that are as consistent as possible

In order to be able to compare the results over the years, you should always use the same methods to value your inventories. If you deviate from your valuation method, you should have good reasons for doing so (see also: Changing the stock issue method).

Make sure your stock is up to date

Take all relevant factors, such as the purchase price or current market value, into account when valuing your stock.

Use software support

The average discounter already stocks 2,000 items or more (Statista). Without software support, it is practically impossible to keep track of the best-before date, for example. To optimize stock valuation and avoid errors, you should therefore use software.

Valuation with CKL-Software


Valuation plays a pivotal role in the financial reporting of retail companies, ensuring accurate representation of their assets and performance. In this regard, Valuation 365 emerges as a vital tool. Seamlessly integrated with Microsoft Dynamics 365 Business Central, this app facilitates the assessment of item movements, empowering businesses to derive pertinent values for their annual inventory.

Not only does Valuation 365 streamline the valuation process, but it also aids in aligning asset values with statutory regulations, ensuring compliance and accuracy in financial statements. By leveraging this app, retail companies can confidently prepare and assess their current assets, bolstering transparency and reliability in their financial reporting practices.

Curious about how Valuation 365 can enhance your financial reporting? Join us for an upcoming webcast where we delve into its features and benefits. Gain firsthand insights and explore the potential of Valuation 365 in optimizing your valuation processes. Secure your spot today by registering for our Valuation 365 Webcast and unlock the power of accurate valuation in retail financial reporting.

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Change the Costing Method ändern, avoid errors

Whether for legal reasons, changes in procurement or user error, there are many reasons for changing the stock issue method, which is why they are a natural part of everyday life for finance professionals.

For those responsible, the most important aspect of the change is to carry out the adjustment in an orderly process. This is the only way to ensure a complete and correct reassessment.

Sources of error

This task requires attention if the adjustment is made during ongoing operations – which should be the normal case. The material to be re-evaluated is located in many places: in the warehouse, in assembly, in transfer warehouses, in dispatch. There may also be an order on the way.

That is why it is important to first analyse the existing stock:

  • What is the stock level in the warehouse?
  • Which stocks are in assembly or otherwise being processed?
  • Are there negative stocks?

Once the preparations have been completed, the changeover takes place on a specific key date. To ensure an error-free process, the following mental model is helpful: the positive stocks are derecognised using the old method and then reinstated using the new method.

Proposal CKL Software

Costing Method 365 is an app for Microsoft Dynamics 365 Business Central. With the app from CKL Software, you can change the inventory issue method and valuation basis of an existing item, even though postings already exist for this item. The advantages are

  • Flexibility
    You can customise the method for each item individually and multiple times.
  • Transparency
    The item history is retained and your changes remain traceable. This improves your ability to provide information during tax audits.
  • Consistency
    The error rate is reduced, as a manual change process can always be subject to errors.

See for yourself and attend one of our upcoming webinars.

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Microsoft Dynamics 365 Business Central: How to change the Costing Method

You need to be aware of this when you change the warehouse issue method in Microsoft Dynamics 365 Business Central.

Reasons for changes

There are many reasons for changing the stock issue method. These include, for example

  • Mistakes
    In retrospect, the method turns out to be unfavourable or the wrong method was chosen by mistake.
  • Internationalisation
    The company has decided to adopt a new accounting system in accordance with IAS International Accounting Standards – or feels compelled to do so.
  • Audit
    After an intervention by the auditor, the retirement method must be adjusted and changed.
  • Procurement
    In future, goods that have been purchased for a long time will be produced in-house or vice versa – in other words, a classic switch from in-house to external production. Either way, the current stock issue method must be changed – and this may have to be done several times.
  • Fluctuations on the procurement market
    Procurement prices have been stable for years, but this has changed. The stock disposal method is to be adjusted accordingly.

Proposal Microsoft Dynamics 365 Business Central

Changing the warehouse issue method is not part of the standard functionality of Microsoft Dynamics 365 Business Central and is therefore not possible. The recommendation is to create a new item.

If you decide to use this method, please note:

  • High manual effort
    Creating a new article means removing the old article, creating a new article as a new version, posting the stock again and, above all, changing it again as a component in all parts lists.
  • Consistency in the ongoing changeover process
    During the changeover and internal coordination, business continues. Goods are procured and posted in the system. Find a rule for when new arrivals are posted to the new article number and ensure that everyone involved is informed.
  • Ability to provide information in the tax audit
    When a new article is created, the documentation of the article history is lost – an information gap that can lead to unpleasant queries in the tax audit. Reconciliation and traceability are difficult.

In addition, items are usually provided with a whole range of additional information (supplier information, batch sizes, cost factors, etc.). These have already been created once – and must be added again for a new item and also have an influence on linked BOM items and levels.

Proposal CKL Software

Costing Method 365 is an app for Microsoft Dynamics 365 Business Central. With the app from CKL Software, you can change the inventory issue method and valuation basis of an existing item, even though postings already exist for this item. The advantages are

  • Flexibility
    You can customise the method for each item individually and multiple times.
  • Transparency
    The item history is retained and your changes remain traceable. This improves your ability to provide information during tax audits.
  • Consistency:
    The error rate is reduced, as a manual change process can always be subject to errors.

See for yourself and attend one of our upcoming webinars.

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Working Capital Management

When the economic figures point towards a downturn, when customers pay later or not at all, the question of liquidity gains new momentum.

How professionals secure liquidity

Financial professionals know a number of ways to secure liquidity:

  • Take out loans.
  • Consistently manage the receivables and dunning process.
  • Manage stocks and warehouses intelligently.

Each of the options strengthens liquidity, but only the third option does not require external influence, i.e. it is independent of the approval and actions of third parties.

How is working capital calculated?

Working capital is calculated as the difference between current assets and current liabilities. This key figure provides information about a company’s short-term solvency.

Working Capital =

Cash and cash equivalents
+ Receivables
+ Inventories
− (short term) Liabilities
+ Advance payments made
− Advance payments received

= Net current assets

A positive value indicates that the company can finance current liabilities from its own cash and cash equivalents.
It is therefore independent of financing at extra cost. It can continue its operations without disruption, reduce liabilities or make investments.

Warehouse management in the light of working capital management

When discussing working capital management, receivables management often takes centre stage. Inventory management and supplier management often remain in the shadows.

This means that companies are missing out on opportunities: a compact, tightly managed warehouse ties up less cash. Some experts believe that the amount of capital tied up can be reduced by 10 to 30 per cent through skilful working capital management.

A analyses by PwC PricewaterhouseCoopers supports this impression. The analysts examined 50 retail companies in Germany, Austria and Switzerland between 2014 and 2018. Revenue increased by 19 per cent during this period. At the same time, however, the proportion of tied-up capital grew.
Retail companies are under particular pressure, as customers today expect a large selection with fast delivery.At the same time, customers buy on account and return a large proportion of the goods delivered.

Other sectors are also familiar with these problems.However, retail companies are particularly challenged to find a balance between customer service and profitability.

Increase working capital

Possible measures to increase working capital include the following:

  • Accelerated procurement channels allow for lower stock levels.
  • Switching to fast-moving items increases cash and cash equivalents.
  • The reduction of slow-moving products and products reduces the capital tied up.

When and to what extent those responsible replenish stocks has a direct impact on working capital.

Evaluate key figures

But at what point is stock in order? Generalised answers are doubtful. However, the key figure “third-degree liquidity” is suitable for orientation and an initial approximation. It is calculated as follows:

Liquidity of the 3rd degree =

((Liquid funds + Current receivables + Inventories)
/ Current liabilities)
* 100

A value below 100 per cent

A result of less than 100 per cent is a bad sign, as current liabilities must be financed from fixed assets. There are probably problems with sales and/or pricing.

Values greater than 120 per cent

A target value greater than 120 per cent is considered desirable.

Values greater than 150 per cent

A value above 150 per cent usually indicates an excessively large warehouse.

Valuation 365 by CKL

Payment delays or payment defaults are side effects of the economic crisis that can only be partially offset by the company’s own efforts. This is why it is particularly worth taking a look at an “optimally value-managed” warehouse in these times.

In one of our next webinars, you will see how you can effectively use the lever to increase liquidity and how CKL’s Valuation 365 app supports you in doing so. Find out more and register.

Quellen

“Creating value through working capital”, PwC-Analyse zum Working Capital Management (WCM) im Einzelhandel, https://www.pwc.de/de/handel-und-konsumguter/creating-value-through-working-capital.html

Working Capital Management: Wie Sie mit Working Capital Management Ihr Kapital effizient einsetzen, https://www.business-wissen.de/hb/wie-sie-mit-working-capital-management-ihr-kapital-effizient-einsetzen/

Working Capital Management, bankenverband, https://bankenverband.de/media/publikationen/fu_Working_Capital_Management.pdf

Working-Capital-Management, Und wie steht es um Ihre Liquidität? WCM-Studie 2017, https://www.pwc.de/de/deals/working-capital-management-studie-2017.pdf

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Data quality: Underestimated risks and solutions

How poor data quality can lead to wrong decisions, financial losses and an image disaster – and why a proactive approach is essential.
Data is the backbone of business decisions. If the quality of the data is not right, serious problems can arise.

These are the obvious ones:

Wrong decisions

Wrong investments or an unattractive range of products: wrong decisions such as these arise due to inaccurate or incomplete information caused by a lack of data quality. This harbours the risk of companies losing their balance and becoming less competitive.

Increased costs

The effort involved in correcting incorrect data means a loss of time and money. It also ties up employees’ time budgets for creative activities. For small and medium-sized companies in particular, the cost of troubleshooting can be a considerable burden.

But that’s not all.

Reputation

One aspect that is often overlooked is the impact on a company’s reputation. Poor data quality can seriously affect the confidence of investors, customers and other stakeholders. This can lead to negative media coverage, a drop in share price, reluctance from potential business partners and loss of customers.

Compliance

Another underestimated risk is legal liability. Companies must provide accurate financial information to avoid legal consequences such as fines and legal action against the company and its executives. A systematic approach to data security is therefore essential to minimise compliance risks.

Insurance problems

Incorrect information due to poor data quality can lead to problems with the insurance company. Insurance companies rely on accurate data to set premiums and assess cover. This can result in the company losing insurance cover or having to pay higher premiums.

Extended process times

Poor data quality can lead to longer process times, for example in order processing, credit decisions, customer service or planning and budgeting.

A proactive approach to data quality not only helps to minimise financial and legal risks, but also strengthens stakeholder confidence and improves the company’s overall performance and competitiveness. In an increasingly data-driven business world, the quality of data is critical to the long-term success of an organisation.

Secure data quality with Inventory 365

The stock value can not only save time and money, but also spare your nerves. Quickly identifying differences between stock accounting and financial accounting, uncovering incorrect postings, analysing details and taking action to correct them – all this will be presented in one of our next webinars. Visit us for more information and to register:
Webinars.

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