We're sure you'll agree. Misinformation can be very harmful. Retailers surely don't need more harmful anythings!
Just last week, we came across the proverbial straw that broke the camel's back. It was a post on the Intuit Quickbooks site*, titled "Inventory Turnover Ratio." And the explanatory article was accompanied by an "Inventory Turnover Calculator."
What do we take exception to? The misleading and/or incorrect information it provides. For example, their "Inventory turnover calculator" requires two entries.
We must take exception. "Total costs involved in selling your products" is NOT the same as Cost of Goods Sold. Nor do they specify that it should be for a 12-month period of time.
We must take exception. What they surely meant to say is inventory @cost.
Their accompanying article provides examples of the two different ways to calculate inventory turnover.
In their example, they use "$70,000 in sales, and your average inventory balance is around $4,000." They do the math, and calculate 17.5 turns.
This time, they use $23,000 for COGS, and still use $4,000 for "your average inventory balance." Therefore, after doing the math, they arrive at 5.75 turns.
Yikes! We must take exception!
Yes, there ARE two formulas for calculating turnover. One requires numbers @cost, the other requires numbers @retail. (see Glossary of Retail Terms on The ROI site) Mixing the two is garbage.
However, what the Intuit article recommends, dividing a cost number into a retail number, or a retail number into a cost number, will always generate garbage. And it is perilous.
How does Intuit explain the garbage results? "That's true; these methods will spit out different results. Both of these equations have their pros and cons." Sigh.
"What is a 'good' inventory turnover ratio?"
Indeed, when addressing whether there are benchmark numbers for inventory turnover, they correctly state that "It depends on the products you sell."
Then they go on to proclaim, "A large business that does millions of dollars in sales will naturally have a much higher number than a one-person operation."
Wait. What?? We MUST take exception.
The size of the operation has no bearing on calculating inventory turnover.
(By the way, Intuit: There ARE Benchmarks available. Go here on The ROI site to see Benchmark numbers for all retail verticals.)
That Fog of Confusion
Actually, we have long harbored concerns about the fog of confusion from Intuit and Quickbooks. Consider the P&L.
And consider this: How many times year do you have to file taxes? And how many times each month or week do you have to make a management decision? That's what we thought. And that's why we take exception. (And why we built a Profit Finder tool to quickly sort and organize expenses into major "buckets.")
Not New Issues. But Much Wider Amplification
Granted, these are not new issues or concerns. There always have been sales pitches by software providers sharing not-quite-accurate retail financial information. Intuit is not alone in using explanatory articles to sell their accounting and POS programs.
But with the internet, the power of SEO to amplify misinformation (Google doesn't know or care about the correct formula for turnover) and now ChatGPT and other AI tools out there, the potential for retailers to be misinformed, malinformed, and/or misled has greatly expanded.
And the ramifications could be significant. Not to mention harmful.
We wish we could get a Surgeon General's warning to stamp out this kind of misinformation. Meanwhile, we must and will take exception.
* John Shieldsmith, Inventory Turnover Ratio, Intuit Quickbooks
As we approach April of 2021, the question for retailers is "Now what?" Having survived 2020, in many cases on guts and guile, we must now focus on how best to survive 2021 and beyond.
As having one foot on the dock and one foot in the boat, the future of retailers in that Red Zone is not a pretty picture.
Granted, there is much talk about the expectation that "convenience" will become a major factor for shoppers going forward. And we don't disagree.
Here's the deal: We see that this has brought heightened awareness of two different retail strategies: Convenience Retailing versus Destination Retailing.
As the Holiday Season approaches, finding good help promises to be especially challenging for retailers this year.
Then, we read "10 Things to Know to Get And Keep Retail Jobs," a to-the-point commentary from Bob Phibbs*, who specializes in retail sales training.
Here are his Top Ten recommendations for prospective retail employees:
This Holiday season is bringing three big waves for retailers, in rapid succession. And each one requires a strikingly different management response.
Faced with the shipping delays (and surcharges), customers have turned to brick-and-mortar stores. The savvy retailers are ready for them.
Have you noticed? That persisting Plague of Uncertainty that keeps hanging around?
And amidst all this relentless uncertainty, you still have a business to run, employees to motivate, customers to satisfy, vendors to deal with, creditors to pay, etc, etc.
Here are some ideas on how to approach that.
This is, after all, The Retail OWNERS Institute. We long have specialized in alerting, coaxing, and applauding retail owners worldwide.
Today's message is a major heads-up.
Keeping pace with the relentless changes in retailing has never been easy. Retailers know that constant adjustments are demanded.
Then, the three pandemics of 2020 happened: COVID; the economic meltdown; the social unrest. And life changed modestly or enormously for almost everyone, including owners of retail businesses.
Still less than $1 a day! 👀