BUILDING THE INVENTORY

Once a business is established and has earned a good credit rating with suppliers, it will have little difficulty obtaining materials and supplies as needed. A new business may encounter some problems at the outset, however. First, suppliers are wary of extending credit to someone who

figure 22-3. An example of the staff organization in a medium-sized garden center. (Delmar/Cengage Learning)

figure 22-4. An example of staff organization in a landscape contracting firm. (Delmar/Cengage Learning)

has no credit history. Second, if shortages develop, suppliers are likely to service their established customers first, leaving newcomers with unfilled orders.

The best way to begin the purchase of materials and supplies is to order small quantities that can be turned over quickly and paid for promptly. Large purchases tie up capital too long and can create credit problems. Also, many items are highly seasonal (such as holiday items) or highly perishable (such as flowers and bedding plants), and these should only be purchased in quantities that can be turned over quickly.

When budgeting for inventory items, it is important to anticipate all of the costs that will be encountered. Cost of the stock is obvious, but there are others, such as the staff time spent purchasing, receiving, and storing the stock, and the cost of keeping stock control records.

To ensure an uninterrupted supply of materials, a reliable source (vendor) should be found for each item that will be needed regularly. Records should be kept regarding the vendors’ terms, the credit lines they have extended for the business, who pays the shipping charges, how delivery is made, and the time usually required to fill orders. It is also desirable to establish cordial relationships with the salespeople who represent the vendors in your area.