Controlling inventory can be a real challenge for a business, especially if the company has limited storage space or cash flow problems. Excess inventory takes up valuable storage space and costs the company money, potentially causing problems with cash flow. Careful monitoring is therefore required to ensure that sufficient stock is held without becoming excessive.
Planning ahead
Be sure to plan stock inventory so that you always have adequate stock for periods of seasonal demand. Prepare for times of the year when you know you will experience increased demand, by ordering in extra stock. If merchandise is proving difficult to sell, or is older, take steps to reduce the stock on hand, perhaps by reducing the price.
Buying in bulk
Although a company may receive discounts for purchasing in bulk, don’t be tempted to buy excessive amounts that may prove difficult to move. You will require storage space that may be better kept aside for other more popular products. Tying up cash in slow-moving products, will negate any savings.
Control of outside vendors
If you outsource stock control to a vendor who supplies and reorders and controls the inventory, ensure the process is monitored. The vendor will often supply a business with its own stock, using its own workforce and transport, displaying the goods for sale. Although this saves time and money for the company owner, some issues may arise.
For example, you may end up with excessive inventory due to slow sales, or you could experience shrinkage due to administration errors, miscounting or even theft. Merchandise that’s out of date may be missed, and products may not be adequately rotated. Management accounting services usually include inventory control, which will ensure that a company has adequate supply without tying up funds.
Automated inventory control
Inventory control is much more efficient and reliable if it is dealt with by a computerised system. All sales will be automatically recorded, so that you are aware of the amount of stock on hand at any time. This helps to plan ahead for any surges in demand, or to unload surplus stock to help improve cashflow.
Trends
The marketplace changes all the time, with consumers moving on to buy the latest products. As merchandise becomes dated, make plans to remove it as soon as possible. It’s crucial to monitor the marketplace regularly, so that you can spot when it is time to update stock.
Control of inventory is necessary in most industries, although it can be time consuming; it is a critical element to ensuring an efficient and effective business and without it can cause costly mistakes to a business. If you have any queries about your inventory and how it’s managed, please call us.