Planning is everything: 6 inventory management tips
As a business owner, your close and accurate inventory management of your company's supply chain (or lack thereof) can have a significant effect on its bottom line.
When you control the timing and cost of your stock items and non-capitalized assets, you optimize cash flow, prevent shortages and overages and forecast future demand with greater accuracy. Of course, failing to do so can lead to everything from delayed deliveries to misrepresented sales figures to disgruntled customers.
Fortunately, inventory management can be made easier these days through automated business apps that help organize and parse much of that data on your behalf.
Here are suggestions for best practices for SMBs seeking to optimize their inventory management in today’s competitive business environment.
- Start with a strong structure. Begin with a strong periodic or perpetual inventory control system, a well-organized ordering system and established inventory categories that help you better delineate fast-moving items versus low-turn stock. Set PAR levels and determine whether your logistics are best suited to the FIFO, LIFO, weighted average or standard or specific item accounting methods.
- Seek a multifaceted inventory management tool. Look for an app that can both scale with your business and integrate with your other business management systems (customer relationship management, financials, marketing, etc.) to provide real-time insights of your firm’s operations. That can save you considerable time and busywork when it comes to manual inputting. “The integrated systems of inventory and accounting will help in better analysis and provide valuable insights like the sales forecast, cash flow. Real-time visibility will help to plan out the right amount of inventory required for demand, purchase orders and sales.” explains an article from Insightful Accountant.
- Work with real-time data. Inventory control is much more difficult when it’s based on dated numbers and estimates. Find a cloud-based tool that provides real-time insights into your critical business data 24-7 so your inventory can be more a science than an art.
- Thoroughly cross-check incoming stock. Make plans to ensure all deliveries are accurate so stock on hand aligns with recorded stock.
- Aim to eliminate physical inventories. With today’s technology, there’s no reason you should have to carry out that costly, grueling and time-consuming process. “It can be incredibly disruptive to the business, and believe me, it’s tedious,” observes Casandra Campbell on Shopify.com. “If you do find a discrepancy, it can be difficult to pinpoint the issue when you’re looking back at an entire year.”
- Prioritize accurate forecasting. That may involve reviewing historical sales figures, market trends, economic factors, predicted growth rates, guaranteed sales, and upcoming promotions and marketing efforts. “Usually, 80% of your demands are generated by only 20% of your products,” notes Jenny Chang in FinancesOnline. “You should set management operations, i.e., forecasting, stock-level check and reordering of these products as priority.”
With its true multi-location inventory tracking capabilities, Gravity Software® (Gravity) empowers you to control your products across multiple locations, enabling each to manage its own pricing, reordering and stocking. And the Microsoft Power Platform (aka Dynamics 365 CRM) lets you access and analyze that info anywhere at any time.
Read more tips on bringing your accounting methodology up to current standards by downloading our free guide on the "Top Skills Modern Accountants Need for 2020 and Beyond.”
Or, simply schedule an online demo of Gravity Software today.