Shopkeeping glossary
Plain-English definitions of the stock, selling and money terms small shop owners run into, with worked examples.
A
- ABC analysisABC analysis ranks your products by their share of sales or profit and sorts them into three groups. A items matter most, B items are in the middle and C items matter least.
- Average saleAverage sale, also called average transaction value, is the total sales for a period divided by the number of sales in that period. It tells you what a typical customer spends per visit.
B
- BackorderA backorder is an order a customer places for a product that is out of stock, to be filled when the next delivery arrives.
- Barcode (UPC and EAN)A barcode is a pattern of lines that encodes a product number so a scanner can read it in a fraction of a second. Retail products most often carry a 12-digit UPC or a 13-digit EAN.
- Break-even pointThe break-even point is the amount of sales you need in a period to cover all your costs exactly, so that you make neither a profit nor a loss. Every dollar above it is profit.
C
- Cash flowCash flow is the movement of money into and out of the business over a period. Positive cash flow means more came in than went out. It is not the same as profit.
- Cash upTo cash up is to count the money in the till at the end of the day and compare it with what your sales record says it should be. The difference, if any, is an overage or a shortage.
- Cost of goods sold (COGS)Cost of goods sold, or COGS, is the total purchase cost of the products you sold during a period. It leaves out stock still on the shelf and costs unrelated to the goods themselves.
- Cycle countA cycle count is a regular count of a small part of your inventory, so every product gets checked over time without closing the shop for a full count.
D
- Days on handDays on hand is how many days your current stock of a product will last at the rate you are selling it. It is the quickest way to see whether you hold too little or too much.
- Dead stockDead stock is inventory that has not sold for a long time and is unlikely to sell at its normal price. Unlike slow-moving stock, it has effectively stopped moving.
- Digital walletA digital wallet, or mobile wallet, is an app on a phone that holds money and lets the owner pay or send money to others. Shops accept it by scanning a code or confirming a transfer.
F
- FIFO (first in, first out)FIFO, or first in, first out, means the stock you received first is the stock you sell first. It describes both how to rotate shelves and a way to work out the cost of what you sold.
- FloatA float is a fixed amount of cash, mostly in small notes and coins, kept in the till at the start of the day so you can give change to the first customers.
G
- GCT (General Consumption Tax)GCT, or General Consumption Tax, is Jamaica's sales tax on most goods and services. Businesses registered with Tax Administration Jamaica (TAJ) add it to prices, collect it from customers and pay it over, less GCT they paid on their own purchases.
- Gross marginGross margin is the share of each sale that is left as gross profit, shown as a percentage of the selling price. A 40 percent margin means 40 cents of every dollar of sales is left after the product cost.
- Gross profitGross profit is the money left from your sales after subtracting what the goods you sold cost you to buy. It is measured before rent, wages and other running costs.
I
- Inventory turnoverInventory turnover is the number of times you sell and replace your average stock in a year. A higher number means money moves through your shelves faster.
- Inventory valuationInventory valuation is the money value of the stock you hold, usually measured at what it cost you rather than what you will sell it for.
L
- Landed costLanded cost is the total cost of getting a product onto your shelf: the price you paid the supplier plus freight, duties, taxes that cannot be reclaimed, and handling.
- Lead timeLead time is the number of days between deciding to order a product and having it counted onto your shelf, ready to sell. It is the gap your stock has to last through.
P
- Par levelA par level is the quantity of a product you want to have on hand after each restock. You count what is there and order enough to bring it back up to par.
- Payment linkA payment link is a web address you send to a customer, by message or email, that opens a secure page where they can pay by card or other online method. You do not need a website or a card terminal.
- Point of sale (POS)A point of sale, or POS, is the place and the tool where a customer pays for goods and the sale is recorded. In a small shop it can be a till, a tablet or a phone running sales software.
- Purchase order (PO)A purchase order, or PO, is a written request from a buyer to a supplier to supply specific goods at an agreed price. Once the supplier accepts it, it becomes the record of what was ordered.
R
- ReceiptA receipt is a record of a sale given to the customer, showing what they bought, how much they paid and when. It is proof of purchase for them and a matching record for the shop.
- RefundA refund is money returned to a customer for a completed sale, usually because they brought the item back. It reduces your sales and, if the item is resellable, puts it back into stock.
- Reorder pointA reorder point is the stock level at which you place an order for more of a product, so the delivery arrives before you run out.
S
- Safety stockSafety stock is extra inventory kept on hand to cover unexpectedly high sales or a late delivery. It is the buffer between running smoothly and running out.
- Sales taxSales tax is a percentage added to the selling price of goods or services. The shop collects it from the customer and pays it to the tax authority. It is not the shop's income.
- ShrinkageShrinkage is the difference between the stock your records say you have and the stock you actually have. It comes from theft, damage, spoilage and mistakes.
- SKU (stock keeping unit)A SKU, or stock keeping unit, is a short code a shop creates to identify one exact product, such as one size of one item. It lets you count, price and reorder that product without mixing it up with similar ones.
- Stock inStock in is the act of recording goods you have received from a supplier, so your stock count increases to match what is on the shelf.
- Stock-outA stock-out is when a customer wants a product that you normally sell and you have none left on the shelf. Each one is a lost sale, and sometimes a lost customer.
- StocktakeA stocktake is a physical count of all the stock in your shop, compared with what your records say you should have. It is also called a stock count or inventory count.
V
- VAT (value added tax)VAT, or value added tax, is a sales tax charged on goods and services at each step from producer to shopper. Registered businesses collect it on sales, subtract the VAT they paid on purchases, and pay the difference to the government.
- VoidA void cancels a sale, or one line of a sale, as though it never happened. It is used for mistakes caught at the till, before the customer leaves.