Where is your cash going? You’ve invested money in your business or borrowed funds- what are you spending it on? For most businesses, especially retailers, capital is tied up in two major categories: inventory and receivables. As a result, managing the cash flow related to inventory purchases is critical for business success.
If you order goods that never arrive, you have two problems. First, you can’t make delivery of a product or service to your client. Second, you’ve potentially lost funds paid for the goods that haven’t been received.
“A St. Louis man- which used nine aliases- sold digital cameras, computers, Playstation 2 game systems and Bose speakers to people on eBay. (He) didn’t have all of the merchandise that he had sold. (He) also defrauded FedEx and Western Union by using their services, then denying the charges or using fake accounts.”
What to do? First, check on the legitimacy of any supplier you use- ask for references. Second, avoid making any payments until goods are received. Finally, find good suppliers and negotiate contracts. You can use contracts to finalize goods to be delivered, pricing and payment terms.
The Lesson: Research your suppliers and negotiate contracts whenever possible.
Your Homework: Are you using multiple suppliers for your largest inventory purchases? How much do you know about your suppliers? If your big suppliers can’t meet your needs, do you have systems in place to find someone else?
(Source: “Cyber con man gets 27 months for scam selling items on eBay ”, St. Louis Post Dispatch, 5/12/07)
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