Cost of Goods Sold (1 of 2): Buy Right & Save - John M. Leask II CPA/ABV, CVA

Cost of Goods Sold

Part 1 of a 2 part series

Warning Signs:

    • Decreased gross margin.
    • Increased cost of goods sold.
    • Significant adverse deviations from budget.
    • Significant increase in a particular line item’s cost.

Steps to Improve: BUY RIGHT & SAVE

  • Buying right is better than a sales increase; negotiate special discount deals.
  • Comparison shop supply prices.
  • Get competitive bids.
  • Shop around: bulk purchase discounts; annual totals.
  • Be ready to change suppliers, brands; loyalty is a two-way street.
  • Negotiate well: payment terms; storage; price; shipment.
  • Buy in volume for discounts.
  • Take advantage of purchase discounts.
  • Take advantage of prompt payment discounts.
  • Track lost purchase discounts.
  • Opportunity buy and buy when unusually good deals are available.
  • Scale back orders but pounce on deals.
  • Buy from or near prime source; cut out middlemen.
  • Buy directly from manufacturers.
  • Find unusual sources: use scrap/remnants; new ways to do things.
  • Insist on timely delivery.
  • Insist on good quality products.
  • Periodically review available alternatives for major expense items.
  • Rate key suppliers on cost, quality and delivery and let them know.

Back to The Business Doctor

>>Cost of Goods Sold (1 of 2): Buy Right & Save
>>Cost of Goods Sold (2 of 2): Cutting Overhead