Inventory is the largest asset on your company's balance sheet and the biggest revenue generator you have. Therefore it is essentially the the lifeblood of your entire business.
If it is poorly manages, it can be detrimental. A business without strategies regarding the inflow and outflow of goods, often risk being unable to meet customer demands and this mismanaged stock could eventually eat away at their profits.
These simple steps will ensure your business doesn't run the risk of this common and eventually costly inventory problems.
Implement a system for accurate stock tracking
It is highly necessary to know which products are coming in and out, and when, in order to efficiently restock.
- Factor in lead time when calculating your basic stock, so you don't risk running out of a product before deliveries can be made – this can lead to disappointing your customers and missing out on revenue opportunities.
- Implement an automated inventory management system to track fill rate and inventory returns for all products, and gain a better understanding on how much stock you have at any given moment.
Avoid excess inventory
Keeping excess inventory puts financial strain on your business in multiple ways. It costs extra overhead, increases insurance expenses and decreases liquidity. It also takes up space which could be given to higher selling products.
Here are a few ways efficient inventory management can help avoid the problem of dead stock:
- Don't be tempted by discounts into making large stock orders. These may take longer to sell and make a profit from, whereby in the meantime they are sitting in storage.
- Calculate and then stick to a realistic safety margin to ensure you only buy what is selling reasonably well. A system for tracking/checking sales and profit often is key in making informed buying decisions.
- Sell overstock at a discount. Another options is to return excess stock to the supplier, which may be more worth it even if there is a restocking fee.
Prioritise your inventory needs
Avoiding inventory mismanagement can be done by implementing a system to prioritise inventory needs. It is necessary to know which items have the highest turnover ratio, in order to always have them on hand.
An approach to use is to group your inventory based on their dollar impact on the business. This will give you a clear view of what to purchase more of, to avoid stocking up on non-essentials.
Final tips for better inventory control
When looking into switching or upgrading accounting software, look into one that comes with inventory pricing and availability features.Your staff should also be trained in how to use these inventory features and ensure they have a hand on the overall inventory management practices.
A reputation for customer service will be earned for your business as a result of having customer data at your fingertips. You can respond quickly to customer questions and queries. Upselling becomes easy, as you can suggest them substitutions and offer add ons based on their buying preferences.