There was a time when fear would be the first feeling that comes to mind whenever I hear the word inventory. During my younger years when I worked part-time as a cashier, the word itself only meant one thing: we are going to be staying at the store a bit longer to count and count and count some more. This is not rare for most businesses to try to reconcile their inventory at the end of the year, the month, and even every day.
This is usually done by counting up all their physical product and making sure it matches with what they have logged on their books. When the company is big enough like the one I used to work for, this requires every bit of help and can take quite a lot of time. This is where inventory management software systems can genuinely help.
There are times nowadays that I am beginning to understand just how crucial it is to perform solid inventory management routines. Inventory in itself does not seem significant until it is put in the context of being a placeholder for money. You have to remember that you did pay money for your inventory, and you will only get that money back, hopefully with some profit, when you sell it.
Whenever you are holding or keeping inventory, this means that you are tying up a lot of cash. This is why good inventory management systems are needed, especially for growing a company. Not dissimilar to cash flow works, this important aspect can make or break your business.
In all its essence Inventory management is simply the act of monitoring or keeping track of aaa the company’s stocked goods and monitoring their weight, dimensions, amounts, and location. The mission of inventory management is to make sure that only a minimum of the cost of holding inventory is going to be expended. This can be done by helping business owners know when it is the perfect time to replenish products or restock or buy more materials to manufacture them if the company is a manufacturing firm.
How important is Inventory Management
You will know when you have adequate inventory management of you have the essentials needed for ensuring a business has enough stock on hand to meet customer demand. Should inventory management is not handled well, this can have catastrophic results. In business, this can result in either losing money on potential sales that can’t be filled, or wasting money by stocking too much inventory. Here are some of the more common mistakes that can happen when doing inventory management.
Some products that you might be selling are those that have expiry dates, like food or makeup, and there is a genuine chance it will go bad if you don’t sell it in time. By using basic inventory management routines, you can avoid any unnecessary spoilage.
Reduce Dead Stocks
The term dead stock refers to the kinds of stocks that can no longer be sold, but not necessarily because it expired, but it could have gone out of season, out of style, or otherwise become irrelevant. The proper thing to do is manage your inventory better, so you can avoid dead stock and not incur the losses they bring.
Reduce Storage Costs
The act of warehousing is often a cost that can vary, meaning it can change quite a lot based on how much product you are planning on storing. If your store has way too much product at once or end up with a product that is difficult to sell, then this variable cost will go up. You should do your best to avoid this from happening so you can save money.
Another tip that you may want to consider is to buy proprietary inventory management software that can do most of the heavy lifting for you. This way, you can avoid any unnecessary costs that are brought upon by human error and mismanagement.
To improve cash flow, improve inventory management
Cost efficiency is not the only good inventory management practice that you should consider, you have to look at some ways to improve cash flow in other ways too. You have to remember that the items in your inventory are products that you have likely already paid for with cash, that can include checks and electronic transfers, and you are going to sell it for cash. However, if these items are sitting in your warehouse, it is tough to consider them as casy. As an exercise for you to get the meaning, you may want to try paying your landlord in dog collars or iPhone cases.
That is the reason why it is incredibly vital to factor in inventory into your cash flow management. Because inventory has a direct effects on sales by dictating how much you can sell and expenses by dictating what you have to buy. Both of these elements factor heavily into how much cash you have got on your hand. To make the long story short, the better the inventory management is, the more chance that it leads to better cash flow management.
There are times when you have an inventory management system and even have and inventory management software, yet you will not know precisely how much product you have. The worst of it is that, based on sales you can project, you will have to run out and make sure you replace it on time. It does not merely help ensure you do not lose sales which is critical for cash flow, but it also allows you plan for purchasing more so you can make sure that you have enough cash set aside.
Sometimes people avert from investing in a top quality inventory management software because they might want to reduce expenses. This is however, wrong as a robust inventory management system allows you to retain most of the money that you have from profit.