Inventory is one of the largest investments made by most businesses, yet it is often overlooked. In fact, inventory can often mean the difference between success and failure. Between the lack of experience and the access to appropriate technology, small businesses have not had the tools to make smart inventory management decisions. That is where ePhiphony Incorporated's patent pending solution, Phitch OC 9.0, comes in to guide small businesses to optimize their inventory at peak financial performance.
Phitch is the only small business technology solution to optimize inventory at maximum economic profit. Economic profit consists of four primary components: net income, taxes, capital, and cost of capital. Economic profit is capable of weighing each business entity type by weighing their cost of capital.
Cost of capital is the weighted average cost of capital and represents the cost of maintaining a dollar of capital invested for one year. This cost, normally expressed as a percentage, is based upon factors such as the average expected return on alternative investments and current bank interest rate for borrowing.
For example, a study by NYU showed that the cost of capital varied by industry:
- Manufacturing 7.0%
- Wholesale/Distribution 6.3%
- Retail 8.4%
- All Businesses 7.0%
The point to stress is that cost of capital varies and consequently not all inventory is the same. QuickBooks currently has no capability to weigh your cost of capital to determine inventory levels as the only option is manual reorder points and build points. Phitch OC 9.0 is the only tool to weigh the cost of capital to determine the optimium inventory level.