Question: I have several items I sell listed in Sales Forecast Table. But, I am unable to specify individually the items I will be requiring to hold inventory for. For example, we keep in inventory fruit concentrates imported in bulk and sold to customers in small quantities. Typically, we hold 1 month’s inventory in hand. For other items no inventory is held and they are bought and sold against sales contract. How do I handle this in my plan?
Don’t worry. Your financial projections don’t care what your inventory is, to the financials it’s all just dollars and dollar value. For example, if your normal monthly cost of sales is $5,000 and you have $2,500 worth of inventory, that’s half a month’s worth of inventory, regardless of whether your inventory is in fruit concentrates, or rotten bananas, or prune pits.
Not that you don’t care, or that you don’t need to know in order to make good estimates, but this is a good chance to point out that some people get lost in the details in a way that doesn’t help your plan. It’s planning, not accounting, and you’re dealing with quantities of dollars not items.
This could be a good point for me to suggest that as you develop a business plan you don’t complicate your life trying to put too much detail into guessing the future. Stick with reasonable estimates. Don’t try to elaborately construct the details for months and years in advance when the broad-brush main numbers are only at best good guesses. I’ve seen people getting old as they try to divide their inventory into categories, or figure out how to piece apart payments from 15 different classes of clients. Your goal is to have a good reasonable guess and a system to go back and track actual results.