ProblemStock
The free cartons and samples your supplier leaves
Buy ten get one, a box of samples, a replacement for spoiled stock. If none of it is written down, your buy rate, your count and your profit are all wrong.
Four kinds of free goods, and what each one really is
Write it in, all of it. Count paid pieces and free pieces separately at the step, enter the free ones as stock at zero cost, then divide what you actually paid by everything that actually arrived. That figure is your real buy rate. The one printed on the bill is not.
Four kinds of free, and none of them is a gift
Rasheed's van comes on a Tuesday. Ten cartons of soap, and as he is leaving he slides an eleventh one onto the step and says "that one is on the scheme, keep it." He is not being generous and you are not being lucky. He is giving you a rate cut in a shape that fits on a van.
It arrives in four different shapes, and they are not the same thing at all. A scheme quantity, ten paid and one free. A box of samples for customers to try. A replacement carton for goods that spoiled on your shelf. And a new line pushed in free so you will stock it.
What all four have in common is the problem. Nothing left the galla, so nothing gets written, so your book quietly stops matching your shop. The count is short, because eleven cartons arrived and ten were recorded. The rate is wrong, because you paid Rs 19,000 for eleven cartons and your book says you paid Rs 1,900 each. And the profit you calculate at the end of the month is built on both of those wrong numbers.
What free goods do to your buy rate
This is the part that costs real money, and it costs it in the direction shopkeepers never suspect: you are earning more than you think, and pricing as though you are earning less.
Say ten cartons of soap at Rs 1,900 with an eleventh carton free
Made-up figures, chosen to show the shape. The free carton is not extra profit falling from the sky; it is a lower buy rate you have not written down.
Read the two rates in the middle. Your book says the soap cost Rs 1,900 a carton. It actually cost Rs 1,727, because the money you handed over bought eleven cartons, not ten. That Rs 173 a carton is real margin that exists in your shop and does not exist in your figures.
That matters in two directions. When you sit down to work out your shop's real profit, you are working from a cost that is too high, so the profit you calculate is too low and you make cautious decisions for no reason. And when a customer pushes hard for a discount, you refuse at a floor that was never your real floor, because the price you set is built on a buy rate that is not true.
None of this means free goods are secretly bad. It means they are a price change, and a price change nobody records is a price change that cannot be used.
The count goes wrong as well
The second problem is quieter. Eleven cartons came in, ten were written, and one carton of soap is now in your shop with no paper behind it.
Sell it and your stock figure goes right for the wrong reason. Somebody takes it and there is nothing to notice, because the book never knew it existed. If you are ever trying to work out why stock keeps going missing, unrecorded free goods are one of the first places to look, and they usually explain more of the gap than theft does.
There is a further trap with samples. A box of thirty small packets arrives free, you put it under the counter, and for the next four months it moves whenever somebody remembers it. It is stock. It is worth money. And because nobody ever wrote it down, nobody ever notices that half of it has gone past its date, which is the ordinary route from a free box to dead stock you eventually throw out.
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The rule: everything off the van gets written
The fix is small and it happens at the step, in the same two minutes you are already standing there.
Everything that comes off the van gets written
- 1Count the paid goods and the free goods separatelyTwo numbers on the same line: ten paid, one free. Never one number of eleven.
- 2Write the free pieces as stock coming in at zero costThey are goods you own and can sell. Leaving them out means your count is short from day one.
- 3Work out the real rate across everything that arrivedMoney paid, divided by pieces received. That is your true buy rate, not the one on the bill.
- 4Note what the free goods were forScheme, sample, or replacement for damage. Three different things that must not be mixed.
- 5Put a shelf date on samples and trial stockFree stock with no date is the stock that sits at the back until it is worthless.
- 6Tell your helper the same rule, onceMost unrecorded free goods are unrecorded because the person unloading did not know it mattered.
Two numbers instead of one, on the same line. Ten paid, one free. That single habit fixes the count and gives you the real rate at the same time, because the arithmetic afterwards is just money paid divided by pieces received.
Say what the free goods were for, in one word. Scheme, sample, or replacement. They look identical sitting on the floor and they mean three different things: a scheme is a rate cut, a sample is stock to give away, and a replacement is money you already paid coming back as goods. Mixing them up is how a shopkeeper ends up believing a supplier is generous when he is actually just returning what he owes.
Tell your helper the rule once. Most free goods go unrecorded not because anybody decided to skip them but because the person unloading did not know they counted.
If you keep stock in an app, this is one entry rather than two: in Wasoolo the buy rate lives on the item, so goods received at zero cost pull the average cost of that item down on their own, and the shelf price you decide next is sitting on a number that is actually true.
Pricing the free stock without fooling yourself
Now the tempting mistake. The free carton feels like pure profit, so the instinct is to sell it cheap, because anything you get for it is a gain.
Do not price it separately. Price the item, not the carton. If the same soap sits on your shelf at two prices, customers notice within a week, and the ones who paid the higher price notice hardest. Take the lower real cost and decide once what the shelf price should be, for all eleven cartons.
Where the free carton genuinely helps is in the choices it opens. It gives you room to hold your rate when a supplier's price rises, room to give a regular customer a small allowance without going under your cost, and room to run a proper offer on your own terms. Those are all better uses of Rs 1,900 than quietly selling one carton cheap and forgetting about it.
The samples are different again, and they are worth treating as an advertising cost rather than as stock. Give them out deliberately: to the customer who asks about the new brand, to the man who buys the competing item every week, to the household that has just started a khata with you. Thirty packets handed to thirty chosen people is worth something. Thirty packets slowly disappearing from under the counter is worth nothing at all.
When free goods are actually a cost
Free is not automatically worth taking, and a supplier's man knows this better than anybody. The whole reason for pushing a new line in free is that shelf space is expensive and he is getting it from you at no charge.
Free goods worth taking
- More of something you already sell every week
- A replacement for goods that spoiled on your shelf
- A scheme quantity you would have ordered anyway
- Samples small enough to give away in a week
Free goods that cost you
- A new line nobody in your area has asked for
- Extra quantity that pushes your order size up
- Large sizes when your customers buy small ones
- Anything near its date, however much of it is free
- Free goods tied to ordering more next time
The test is short. Would you have ordered this, at some price, on your own? If yes, take it, because the free quantity is a straight rate cut on something you already sell. If no, then what has just arrived is not goods, it is a slow obligation: shelf space, a corner you have to look at, and a conversation a few weeks later about ordering it properly.
Watch the scheme quantities for the same reason, and be honest about your own weekly numbers before you agree. Buy ten get one is a fine offer if you were going to buy ten. If you normally buy six, the scheme has just talked you into carrying nearly twice your usual stock of one item, and the cash sitting in those extra cartons is cash that is not available for the goods that turn over every week. That is the same arithmetic behind buying stock on credit and it works the same way here: the offer is real, the cost is what you cannot buy instead.
And keep the dates honest. Free goods near their date are the easiest thing in the world for a supplier to move off his own shelf and onto yours. Nobody is doing anything wrong, but you are the one who will be standing in front of them when the date arrives.
The polite refusal is short and it costs you nothing with a supplier worth keeping: "Not this one, it does not move here. Give me the same value on the soap instead." Most suppliers will do exactly that, because what they wanted was the order, not the particular carton. The ones who will not are telling you something useful about how they run their own stock, and that belongs in the larger decision of which suppliers to keep.
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Common questions
Should I really enter free goods when they cost me nothing?
Yes, because they are worth money the moment they arrive. If they are not in the book, your count is short and your buy rate is too high, and both of those quietly move every decision you make afterwards.
How do I record a scheme carton in a paper register?
Write the delivery on one line with two quantities: paid pieces and free pieces. Then write your real rate beside it, which is the money you paid divided by the total pieces. One extra number is the whole job.
My supplier replaced goods that spoiled. Is that free stock?
Not really. That is money you already paid coming back to you as goods, so it should not lower your buy rate. Record it separately with the word replacement, or your figures will show a profit that never happened.
What is a fair way to use free samples?
Give them to people whose habits you are trying to change: the customer who buys the competing brand, the new khata holder, the man who asks about the item. Handed out with a purpose they earn their keep, and left under the counter they expire.
The supplier offers extra free stock if I order double. Should I?
Only if you sell that item fast enough to clear double. Otherwise you have swapped cash you need for stock you do not, and the free portion never covers what the trapped money would have earned on your regular lines.
Can I sell the free carton at a lower price since it cost nothing?
Better not. Two prices for one item on one shelf is noticed quickly and it annoys the customers who paid more. Take the lower real cost into your normal price instead and keep one rate for everybody.