Taming the Information Beast

Information technology is essential to your store’s profitability. The right combination of hardware and software can help you track financial, merchandising, and operating information and provide it in a usable form without contributing to information overload.

What is information technology? We define it as the hardware, software, networking, and telecommunications capabilities used to create, store, retrieve, and distribute information. We’ve come a long way from ledger books and dial telephones!

Before choosing a system, you’ll need to do some homework. For background on performance standards in the

jewelry industry, ask your accountant to get a copy of the Robert Morris & Associates annual report, or ask Jewelers of America for JA’s annual Cost of Doing Business Survey. (The Robert Morris report primarily reflects “big” players in the industry; the JA report categorizes retail jewelers on the basis of volume and type.) Ask your key people what they need to help them perform better, then check the list below to decide which pieces of the information puzzle are most useful:

  • Daily store sales.

  • Daily individual sales.

  • Monthly store sales.

  • Monthly individual sales.

  • Cash flow.

  • Current inventory level.

  • Desired inventory level (at all times).

  • Inventory turn.

  • Identification of “fast turners.”

  • Age of inventory.

  • Monthly fixed expenses.

  • Monthly variable expenses.

  • Monthly general payroll.

  • Monthly open-to-buy.

  • General gross margin.

  • Gross margin by item.

  • Monthly budget.

  • Annual and incidental advertising budget.

After determining the information that will help you run your operation more profitably, shop for the simplest and least expensive system to collect the data, organize it, and deliver reports you can understand, interpret, and act on. Systems for handling inventory information include Jewelry Shopkeeper, Retail Pro, IBIS, and Advanced Retail Management Systems (ARMS).

Contact system suppliers and explain your goals, then ask each how easily and inexpensively they can help you achieve them. Be sure to ask if you can move any old data to a new system. If you already have an inventory-management system, ask the vendors if their systems have translation programs that can load your information into a new database.

Once you have an appropriate inventory system in place, generate the following reports on a regular basis and use them to develop immediate, short-term, and long-term action plans:

Daily, weekly, monthly sales. A good system gives you these figures from POS (point of sale) information. Compare them against your performance budgets and sales goals. They’ll alert you to cash flow issues based on profit margins, guide your open-to-buy decisions, and keep you informed about ongoing productivity. You can also use them to make staffing decisions.

Inventory levels and aging. These reports identify fast- and slow-turning items, which can help you make decisions on price reductions and future purchasing. Most significantly, they help you maximize cash flow and reduce investment of working capital. Used consistently, these reports will help reduce your markdowns and improve your overall margins.

Open-to-buy. The more you use your inventory information, the better you’re able to determine how to budget dollars for new merchandise. These reports will tell you when, what, and how much to buy. In the long run, they’ll help you lower interest costs, improve cash flow, boost your store image, please your customers, and give you tighter inventory control.

Payroll expenses. Computing your payroll costs as a percentage of sales or gross profit allows you to determine your employees’ effectiveness. Analyze the skills of each staff member and assign tasks accordingly. Tying compensation to productivity is appropriate for employees primarily designated as “sales” personnel. Commission income should be supported by a base salary that covers the general duties most salespeople are required to perform. When computing payroll costs, include the cost of benefits.

Weekly and monthly operating expenses. This information is critical for implementing cost controls.

Daily, weekly, monthly discounts. A POS system can give you this information. Use it to measure product and vendor performance, sales personnel performance, gross margins, and loss of profitability.

Receivables aging. Your accounting software should give you this report, which is a critical element in helping you manage your cash flow and collections process.

Monthly budgets and actual performance. Every business should determine both income budgets and expense budgets. Compare actual performance with budgets on a regular basis and adjust your business plan accordingly.

It’s wise to share this information with employees, at least in a general sense. Develop a timeline for the information plan and share that with your staff, too. The result will be staff ownership of the plan, the information, and the success.

Managing information overload. Consider all the publications, memos, and reports you should read this week. How many business journals, trade magazines, staff-generated memos, newspapers, faxes, e-mails, and letters cross your desk? Despite modern technology—or maybe because of it—information overload seems to be getting worse instead of better. Here’s how to cope:

Set information priorities. By some estimates, up to 80% of the data a manager gathers each day may fall into the “nice-to-know-but-useless” category. Don’t burden yourself with information that isn’t critical. Set priorities. Begin by looking at the types of information you collect. It probably falls into one of six categories:

  1. Sales and financial data.

  2. Inventory data.

  3. Customer information (including problem situations).

  4. Personnel information (including problem and development information).

  5. Industry information (including product and pricing data).

  6. Community information.

Rank the six categories (based on your normal circumstances), then ask yourself the following questions to determine which of your information sources are the most effective at providing critical input in each category:

  • What reports do you automatically generate daily? Weekly? Monthly?

  • What publications do you read every day?

  • How do you handle incoming mail and faxes?

  • Do you schedule meetings with certain associates, or do your employees issue memos on projects or problems as needed?

  • Do you regularly check an Internet service for news?

  • Is e-mail an important communication vehicle?

Select the three most important sources of information for each category and limit your input to those. If a piece of information falls outside the categories or doesn’t come from a top source, it’s probably not worth your time.

Eliminate distracting sources of information. Do you subscribe to every magazine, newsletter, periodical, and report that has anything to do with our industry, in the hope that you won’t miss important information? Do you read daily newspapers and general business journals? If so, how much of their information is important and how much is merely nice to know?

Internet research can be profitable if the user has a specific goal in mind, but surfing—one of the Web’s more seductive pleasures—can be an enormous time waster. Bypassing unproductive information sources requires a strong measure of self-discipline.

Communicate face-to-face. Regardless of format, most information reflects the thought or work of another person. A two-way conversation with the creator of the information is the best way to ensure complete, accurate delivery. Instead of reading a memo regarding a customer problem, consider the benefits of a direct conversation with the author. Face-to-face also beats the telephone, which can’t communicate facial expression or body language.

Know when enough is enough. Don’t waste time looking for an elusive “missing piece.” Once you’ve collected a sufficient amount of useful information, cut off research and analysis. A needle in the haystack is rarely as valuable as the time it takes to find it.

Use the Internet to control the Internet. Many believe the Internet has accelerated the pace of information release to an absurd new level. But the volume of new information on the Internet that’s pertinent to our industry is small. To narrow your searches, choose a search engine that allows you to provide preferences. “Bookmark” the sites you use most often.

There’s not much you can’t find in today’s information society, but it takes focus, direction, and planning to make the available data work for you.

Janice Mack Talcott and Kate Peterson are the principals of Performance Concepts, a company that specializes in training, human resources, and development needs for jewelers and other specialty retailers.