What Are Merchandising Operations?

What Are Merchandising Operations?
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Merchandising operations are your purchasing, selling, collecting and payment activities. Although cyclical in nature, they are ongoing operations designed to improve your cash flow. Efficient merchandising operations keeps your store well stocked with inventory that your customers want to buy. Offering attractive credit terms to qualified buyers can increase your sales income. Collecting on your credit sales and paying your invoices promptly keeps the merchandise operations cycle functioning smoothly.

Merchandise Purchase Operations

Your merchandise operations start by placing an order with a vendor. When the merchandise arrives, you enter each item into your inventory accounting system. The merchandise is sorted and placed in storage until it is needed. Return any damaged or incorrect merchandise to the vendor. If your order is missing items, contact the vendor to arrange for another delivery or to have the amount deducted from your invoice total. If you purchase merchandise on credit, enter the vendor’s invoice into your accounts payable system.

Merchandise Selling Operations

Each cash and credit sale increases your sales revenue and reduces your inventory. For cash sales, immediately deduct any sales discount or price markdown from the list price. You receive the cash payment at the point of sale. Credit customers take your merchandise with them with the understanding that payment is due at a later date. You enter a sale into each customer’s accounts receivable account. As merchandise is sold, you take new stock from storage and bring it out for sale. Inspect returned merchandise and return it to the shelves for resale or set it aside if the item cannot be resold.

Payment Collection Operations

Credit customers receive an invoice listing each purchase they made during the accounting cycle and the total amount that is due. You can offer your credit customers a discount if they pay their invoices within a set time. For example, you can allow your customers to take a 2 percent discount off the total invoice amount if they pay within 10 days of the invoice date. Payments reduce the customer’s accounts payable account and increase your cash flow. Collection procedures should include running an accounts receivable aging report so you can better collect overdue amounts from slow-paying or non-paying customers.

Vendor Payment Operations

You use the money you collect from your cash and credit customers to pay your merchandise vendors. Keeping track of the invoice due date allows you to lower your merchandise purchase costs by taking the early payment discount. If you receive damaged merchandise or your purchase order was incorrectly filled, you want to return the merchandise within the vendor’s deadline to get a full credit for that amount. Run an accounts receivable aging report to make sure you do not fall behind in your vendor payments.