Wednesday, December 26, 2007

Lies, Damn Lies and POS

I come from an IT background, so let me tell you, retail information technology for small stores is not the greatest. It's mostly what you can cobble together yourself, often patching off-the-shelf products to work with each other. When it comes to sales data, I've got three sources to look at, each with varying degrees of misinformation. I'm sharing this mostly for the potential business owners out there. I spent my first six months or so obsessed with the tools that showed me the rosiest data, ignoring the one tool that showed me what's important, the bottom line.

My point-of-sales system is my worst offender. All purchases go through the POS so you would think it's this font of knowledge. No, it lies! It lies like a rug! For example, it counts gift certificates as a sale, then it counts redemption of gift certificates as a sale. It double dips, inflating the numbers. Each day it generates a "Z-Report" a retail term for an end-of-day report that provides some raw data. I used to consider it very good data, now I know it's raw. I'll use this data for my next two sales data tools, extracting certain information like credit card sales, and removing certain data, like backing out gift certificate sales. It also has various ways to fool yourself with reporting. There are ten different ways to look at your sales, but after a while you prefer to look at them in ways that reinforce your view.

The second sales tracking tool I use is an Excel spreadsheet. I call it my Open to Buy worksheet. Open to Buy is a retail term used to describe how much money you have available to spend on goods. The spreadsheet takes sales data entered from the Z-Report, including cost of goods sold, and creates a magic number that's my budget for spending. As the store grows, the data is becoming harder to manage. One magic number isn't very useful, especially in hot departments like miniatures. If you aren't careful, your inventory dollars naturally shift to what's doing well. I also use this spreadsheet to track sales data, rather than relying on the lying POS. The sales data I track is better in the Excel spreadsheet and it makes pretty graphs, but it's still suspect. It tracks sales, but mostly gross sales, not net sales, since it only has part of the equation. The final tool is the bottom line.

Quickbooks is king. Quickbooks could track my inventory. It could track payroll. I use it only for the check register, manually entering daily sales number by source. The POS system is supposed to be able to do this through an automated function, but it doesn't do it the way my bank reads it, so it has to be done by hand. It took me a while to understand that the bottom line is king. It cares nothing for cost of goods or gift certificates, it just tells me if the payroll check will bounce and whether I've been mentally inflating numbers with sales and discounts. There's only one day a month I really trust it, when I reconcile the account, but it's generally the truth teller.

There is a Quickbooks POS system that links with Quickbooks, but my research said is wasn't as good. There are also Open to Buy wizards for Microsoft RMS (not Quickbooks POS), my POS system, but they're expensive. So far I haven't found a tool that integrates all these tasks together.

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