JUN 2013

DAYSPA is the business resource for spa & wellness professionals! Each issue covers the latest in skin care, spa treatments, wellness services and management strategies.

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PROFIT CENTER branded products with a 50% cost, and your monthly sales at retail total $5,000. You are then selling inventory valued at $2,500 at wholesale. Your target inventory value, then, would be between $7,500 (three months' worth) and $15,000 (six months' worth), at wholesale. If you perform physical inventory counts monthly, as advised, you will know the difference between your target inventory level and the amount you actually have on your shelves; that difference is what you have to spend this month. Once you know your target spending level, you need to decide how to apportion that budget among your departments. "Look at your retail sales by category," suggests Compton. "If 50% of your total retail sales come from skin care, then that's where you spend 50% of your budget, allowing for some adjustments for seasonality." STAY ON TRACK Maximizing your inventory's profit-making potential goes beyond having the right amount of product on your shelves. A key portion of successful inventory management is setting up your general ledger (see page 114). For those of you who "hate numbers" and want to skip this section—don't! Remember, we can't improve what we can't measure. Inventory should be separated into categories or departments that reflect the design of your service menu, and then into professional and retail segments. If your main service categories are massage and skin care, then those categories should exist for your products. Every product that you purchase has to be coded to the correct general ledger account or you will never be able to accurately track expenses, much less forecast revenue or profit. Let's say that you carry latex gloves for professional use in both your skincare and nailcare departments. When you receive an order of a dozen boxes of gloves, the skincare department claims the entire shipment, and is charged for those professional supplies by coding the invoice to that general ledger entry. However, the nail department decides that they also need some gloves, and takes 3 of the 12 boxes for its own use. As a result, at the end of the month, your nail department professional supply costs will not reflect the use of those gloves, and will look lower, in relation to sales, than it really is. Conversely, the skincare department will have paid for all of the gloves but only used 75% of them, inflating their costs unfairly. Now, if the shipment • Use FreeInfo #61 112 DAYSPA | JUNE 2013

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