At the very top of all profit and loss statements is a line called “revenue.” By downloading this information to your profit and loss statement from Amazon, you can easily see how much your business grew.
This is the exciting stuff, but you also have to understand that this affects how much inventory you have on hand. It’s easy to get excited about moving a lot of products. However, if you don’t make sure that your inventory stock keeps up, you can kiss that revenue growth goodbye
When you look at your profit and loss statement, you get a clear indication not just of the money that you make, but demand levels
You should then take this information and use it to decide whether it’s time to get more inventory from your suppliers. If revenue is ramping up very quickly, you better have a lot of stock on hand so you can fully take advantage of your increase in sales.
You’re going to get caught by surprise because your sales ramped up quickly but you also quickly ran out of inventory. Waiting for your inventory to be restocked is going to be brutal on your business.
Return Rate – What to Look For
Another critical factor you should consider is the return rate. If you notice that month after month you get 6% returns, this tells you two things.
First of all, it’s not high enough for you to possibly switch suppliers or make some drastic changes. Second, it also tells you that when you order stock for a given month, you should pad your order by 6%.
This way, you anticipate 5% of sales refunded. It enables you to meet all targets without a 6% shortfall.