PCA Magazine Winter 2020

60 PCA The Magazine | WINTER 2020 PREMIUMCIGARS.ORG I Argue with Your Accountant | BY JARR I D TRUDEAU, Vice President of Sales, Kristoff Cigars The Industry INVENTORY MANAGEMENT is the single most involved part of managing a successful Profit and Loss. It touches absolutely everything from direct sales to customer service to marketing to the all-important cash flow. To get a handle on how to manage inventory, start by framing inventory as a liability rather than an asset. As the vice president of sales for a manufacturer who is in the business of selling you inventory, this probably seems pretty counterintuitive. The reality of the situation is that your manufacturing partners won’t have a retailer to sell to for very long if that retailer cannot get out from under their inventory liability. In accounting terms, inventory is always positioned as an asset since it is convertible to cash contingent upon your ability to sell it. That is a really easy sentence to write, however, actually executing the task of “selling it” kind of encompasses the entire purpose of your business and incorporates every facet of your Profit and Loss. That’s why accountants, well, account , and business operators handle the revenue generation. It is this simple position taken on the income statement that leads retailers down the dangerous path of viewing their inventory as money in their pockets rather than maybe someday money . I don’t know about you, but I don’t pay my mortgage in money I might make someday. Buying like inventory is cash leads to squeezes on cash flow that will not fix themselves until you fix one of two things: how you buy and/ or how you sell. — Inventory isn’t an asset until it stops being inventory