A solid inventory management is crucial for a business to ensure the company has enough stocked goods or to know when to buy more raw materials to manufacture finished products. Even a slight mishandling in inventory management can either result in a company losing money on tentative sales that can’t be filled or blocking funds by replenishing too much inventory.
Money spent on mis-managed inventory is the money that could have been actually spent on your business growth. A poor inventory management system cannot only affect profitability but also stagnant the business progress and survival. As a business owner, it is imperative that you understand the criticality of inventory management so as to avoid any type of invisible loses that often miss the profit-loss account. Here we share few of the reasons as to why and how you are losing your money by not following the most crucial inventory management practices –
You are not Using Automated Systems
If you are currently using manual process or an Excel sheet to track your stock, you are risking your business in the hands of a data entry operator. No matter how proficient s/he might be, mistakes are bound to happen. In case your stock involves thousands or even hundred products, any inaccuracy can lead to major mishaps. Besides, your entire unit would be wasting a lot of time by checking the papers and fixing errors, one by one.
It is therefore necessary to remove human error as much as possible and make inventory management software an indispensable part of your company process. This automated software unlike manual procedures will not only operate in real time but also allow all the users to access at the same time, no matter where they are located.
Your Dead Stocks aren’t Managed Effectively
Now that dead stocks are stocks that can no longer be sold, either because it expired or have gone out of style and/or season, or otherwise become irrelevant, it is one of the trickiest issues to deal with when it comes to smart inventory management. None of the business wants useless items that take up the space of the right stock as it simply means missing out the crucial revenues that your productive stocks can generate.
Before you start losing money over dead stock, start identifying slow selling stocks, keep a close eye on them through your inventory control software and keep a close watch on the list when buying such stocks tentatively. Always make sure that senior staff members approve purchase orders before they are sent out to avoid any kind of double orders. If you have potential dead stocks in your warehouse, start prioritising discounts and promotions on your dead stocks and/or even sell them as a package deal with the stock that is in demand.
You are Not Prioritizing Your Inventory Management with ABC Technique
No matter whether you have small or large number of items in your stock, you need to facilitate the management of the inventory by segregating into predefined categories based on their consumption/selling value. How to manage inventory with ABC technique? Well, based on the annual usage/sale as well as profits, you need to segregate your stocks into three categories so that you prioritize your inventory by separating out stocks that require a lot of your attention from those that don’t.
A good inventory management is necessary for a good cash flow management. So, it is time that you take control on your inventory and stop losing money. With right system in place, your business has better chance of survival and profitability.