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Learn how to manage your stock in Israel
Good inventory management is a source of savings (lower storage costs, shorter operating cycles and reduced working capital requirements).
Two performance indicators are often used to assess management quality:
Stock turnover in Israel.
Average storage time.
Calculating inventory turnover
Two performance indicators are often used to assess management quality:
Stock turnover in Israel.
Average storage time.
Stock rotation determines the number of times stock is completely renewed to achieve a given sales figure over a given period (year or month).
The expression "My stock turns x times a year" is widely used by managers to express the profitability & quality of their inventory management.
Inventory turnover is calculated in two stages:
You must first calculate the average stock during the period: average stock = (beginning stock + ending stock) ÷ 2. It can be calculated in value or quantity.
Example: If your stock at the beginning of the year is NIS 25,000 and your stock at the end of the year is NIS 32,000. Then your average annual stock will be (25,000 + 32,000) ÷ 2 = 28,500 NIS.
Calculating the inventory turnover rate :
Inventory turnover can be calculated on the basis of purchase prices:
Inventory turnover = sales of goods sold ÷ average inventory (at cost).
Example: If your sales for the year are : 200,000 NIS. Then your inventory turnover rate will be : (200,000 NIS ÷ 28,500 NIS) = 7, which means that your stock has been renewed 7 times to achieve your turnover.
The higher the turnover rate, the better the performance.See also: Guide to doing business in Israel
Calculating inventory turnover
Average shelf life determines the average time between the moment a product is purchased and the moment it is sold.
Average stock duration = (average stock / annual purchasing cost) x 365 days
Example: In the above example, the average storage time = 365 / 7 = 52.14 days.
Here, stock is renewed on average every 52.14 days.
The average storage time indicates the average number of days an item is stored. Care must be taken to ensure that this duration is as short as possible, or that it does not increase..
The "Dray & Dray" accounting firm is based in Jerusalem & Tel Aviv.
We provide day-to-day support for your accounting and tax affairs in Israel.
We also have an English-speaking department specializing in business start-ups and accounting issues in England.
Finally, the firm's real estate department handles tax optimization and real estate issues for owners and investors in Israel.
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