ABA: Inventory – Series 2:
There are several types of inventory to consider:
- Retail Inventory; Is it retail inventory sold online or in stores?
- Wholesale/Distribution Inventory; Is it wholesale inventory purchased in bulk, imported or exported, distributed nationally, regionally or just locally?
- Manufacturing Inventory; Is it manufacturing Inventory with raw materials, work in process materials, and finished goods to consider?
Introduction to the Company
Headquarters of your Company may be just the tip of the spear or they may house every part of your business under one roof. You’ll begin by talking to the lead executive, that might be the CEO, president, CFO, controller, or possibly the head of sales. The questions start off simple like asking them what they do and then lead to more specific and complex like:
- What is it?
- How is it made?
- Where is it made?
- Is it regulated?
- Is it proprietary?
- Is it a commodity or acts like a commodity?
- Is it costly to dispose of?
- Is it obsolete?
- Is it costly to move?
Finding out what you have isn’t as daunting as you may have believed, and by following some of the below guidelines they can help you find the value in what your borrower wants you to call collateral.
Walking the building
See how the business makes its money by walking the building. Most of the time this step can be done throughout the introduction to the Company, because much of what the initial topics are visible when walking the building. In general, I liked getting to see the raw materials move into the work in process stage and see what the final products looked like. Seeing it for myself always built an appreciation for the business. With distribution or warehouse business my level of interest was more focused on how easily the product flowed in and out of the building.
Can You easily find what is being reported? Can you manage fulfillment or hire someone, is it important to keep on key employees that know the inventory management system? Is it easy to understand how items are stored, retrieved, and reported?
Remember you can contact Cobblestone Management to review your existing borrowers’ and new prospects’ inventories for an in-depth inventory review or inventory appraisal. Stay tuned for ABA Inventory Series 3.