A by cathy.

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I am Cathy. I am a Certified Public Accountant and a business consultant for years. I want to share my expertise thru this blog which is intended to help people who are planning or who are already in business. The topics range from Accounting for Small Business, Cash Management, Inventory Management, Assets Management and Financing. The terminologies will be simplified for laymen and business jargons will be explained for clarity.

Sunday, November 04, 2007

Reasons why small businesses fail part 3

This is the continuation of the discussion of causes of failure of businesses put up by OFW/OF.

2. Poor inventory management
This pertains to businesses that stock inventories. Even service businesses like restaurants, beauty parlors and motor shops carry inventories of supplies.

They say that restaurants or anything about food is "tubong lugaw"( porridge) . Yes, you're going to eat nothing but porridge when your business goes bankrupt because of poor inventory management.

Are you aware that there may be people in your business who's doing their grocery shopping in your restaurant's food storage? This is what we call pilferage. And how do they do it when you got your security or they are being checked before they leave the premises?

The easiest way to bring the items out is thru the trash can. The dressed chicken or kilos of prime beef or pork are wrapped in thick waterproofed plastic and then put in the trash cans. The pilferers do not operate alone. Another individual or individuals retrieved the pilfered goods from the trash bins. They know the shedule of garbage disposal. Then they sell these to small rstaurants or to public market stall holders who sell them in chop-chop.

The easiest to pilfer are the beauty parlor supplies. The owner cannot exactly monitor the consumption of the acetone, the nail polish and the cotton swabs.

I remember the conversation of a friend with her sister working in a big-time beauty parlor. She said that she had an appointment the following and she did not have time to go to the parlor for retouch of her manicure, so if the sister could please bring the color that she needed.

Pilferage does not only happen in big businesses. Office supplies are the common items which are easily taken home by employees.Ouch does it hurt?

In the grocery store where I do my food shopping, I noticed an employee dropping some
good fruits in a cart full of soiled vegetables as he went about restocking the vegetable and fruit sections.

Last Friday, I noticed that the exit going to the back side of the grocery was padlocked. There is just one exit open for customers and employees.

One of the experiences I had when I was an auditor was the discovery how new unauthorized copies of books were sold in small second hand books at a price of used books.

The employees were subjected to body search. Both men and women and yet the pilferage problem never abated.

The books were being taken out chapter by chapter. Then they were compiled, bound and sold without the signature of the author.

Inside the printing room, parts of a book were just lying down in every corner because no one suspected that these could be put together as long as they know the
sequence of the pages.

Related articles:

1. Reasons for the Failure of Small businesses Part 2

2. Reasons why small businesses fail Part 1

3. Reasons why small businesses fail Part 4.


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