Inventory is one crucial asset of any merchandising entity. But often times, it is often the most mismanaged one. Business owners are at a loss on how to go about in managing their inventory. And this is quite alarming considering great percentage of one’s capital is invested here. For those whose businesses are starting to grow, it is imperative that all systems are in place and one allows the systems to grow along with the business. And one crucial system one must have in place is the inventory system.
A little assistance in inventory management would be helpful but consulting services from accountants and other experts could cause a lot. Thus in the process, most companies start without the right system. This leaves them and their investments exposed to inherent business risks they could have avoided with simple, do-able systems and controls. Managing inventory is no rocket-science. There are practical steps to go about with this.
Tip#1 Monitor well
Good monitoring means having periodic count. Periodic inventory count means conducting actual counts as frequently as needed. This is dependent as to how inventory intensive your company is. Generally, monthly counts will do. You could easily come up with your own procedure in counting your stocks. In this way, your process will be tailor-fitted to suit your company’s size and resources.
Tip#2 Keep a close tab
When you are asked to keep a close tab on your goods, this means keeping an orderly inventory record. Having good inventory records means properly recording inventory movements. Inventory transactions like accepting from suppliers and delivery to customers or transfer to warehouses must all be reflected in the records. And at the end, the records must be reconciled with the actual counts conducted. This is to ensure that all are accounted for. Pilferage could be controlled. There could be better customer service since errors in deliveries of ordered items could now be traced.
Tip#3 Don’t Overstock
Next is plan your inventory purchases well. This also means studying your sales trends to see the adequate volume to be maintained in your shelves and warehouses. It is crucial for you to adequately plan your inventory levels since this affects your capacity to serve your customers and this also means capital getting tied up in stocks. Too low inventory levels will mean running out of stocks and delaying customer service or worse, not able to receive customer orders. And too high inventory levels could mean slow inventory turnover. And if you end up investing in slow moving items, you will end up experiencing slow returns to your investments which is something to be avoided. Just like in any business, your goal must be to rake in the returns at the soonest possible time to enable you to reinvest.
Tip#4 Bad goods, Watchout!
Aside from looking into your inventory levels and ascertaining that your records are truly showing the real story behind inventory, you must also look into the state of your stocks. Some items get damaged, or expired while in warehouses and shelves. This usually occurs when overstocking occurred and inventory movement was slow. At times, this could also be due to poor warehousing. Though this is inevitable in most merchandising companies, it is best that you come up with arrangements with your suppliers regarding these items. Ask your suppliers regarding their policies and practices when it comes to bad stocks. You’d be surprised at how accommodating their terms could be. In the process, you are able to minimize losses due to bad or expired goods.
Tip#5 Aim for Better Storage
Lastly, another investment that you should look into along with inventory is investment in your inventory storage. A lot of losses occur mainly because the stocks purchased were not adequately stored right after delivery in company premises. When you are dealing with perishable stocks, it is wise that you invest well in good storage. This could mean adequate warehouse or well-placed shelves in stores. In this way, you are able properly house or store your inventory items and thus avoid or lessen opportunities for pilferage, damage to goods, spillage, etc. Good housekeeping will help you monitor your inventory more easily.
This article was written by Jeff Jackson who is President of Merchant Money. Merchant Money specializes in the cash advance business for the last 6 years. Merchant Money also provides merchant credit card processing services to new and existing business owners