The phrase “inventory management” may seem like a terrifying word. But, as a small business owner, you know how necessary inventory management is to run an efficient business and make money in the process. Proper inventory management is vital whether you own a salon, a veterinary clinic, a food truck, or any other type of business with inventory.
Handle Your Inventory Smarter, Not Harder
In today’s competitive marketplace, your business can’t afford any losses. As a result, inventory nightmares can increase due to human error. So if you’re among the 43% of small business owners that still count inventory by hand and manually write or key in data, you should reconsider your inventory management system. When you switch to an automated barcode system, you’ll save time and money in several ways, which include:
Spoilage
If your business handles items with expiration dates, like food or cosmetics, they can become unusable or even spoiled if not sold in time. And unusable products mean your investments and potential profits go down the drain. A solid inventory management system can be your defense against spoilage. You’ll have access to real-time data, allowing you to know the lifecycle of your stock and organize items to sell older products first.
Deadstock
An expiration date isn’t the only factor in your products going “bad.” Deadstock is items that can’t be sold for a variety of other reasons:
- They have gone out of style
- They have gone out of season
- Products have become irrelevant
Typically, items are declared “dead” after sitting on a shelf for a year. An efficient inventory management system will provide the knowledge you need to order the right amount of these specific items. Sales reports can recognize if an item is considered “dead” before buying it. In addition, these reports are helpful for distributors and small businesses looking to purchase new products.
Storage Costs
Warehouse expenses can fluctuate based on how much storage space you need. For example, storage costs increase when your store has too many products at once or a product that is difficult to sell. A well-executed inventory management system can help forecast what items sell, what doesn’t, and the quantity of the items sold. This forecasting can help you make more informed purchasing decisions, saving your business money.
Improve Your Cash Flow
By developing a solid inventory management system, you will be pleased with how much money you’ll save over time. Inventory management can also increase cash flow to your business. You pay for the products you want to sell and hope to make a profit, so it is essential to factor inventory management into your cash flow management. In addition, inventory management directly impacts expenses with real-time reports about your purchases. These are the primary factors that determine how much cash you have to spend. Inventory management systems help you plan, ensure you buy the proper amount of products and have a reasonable amount of cash set aside.
Keep Revenue Flowing
Here are inventory management solutions to ensure your small business keeps revenue flowing:
- Watch the par levels, which are the minimum number of products in your stock at all times. When inventory drops below these levels, you know it’s time to order more. Check your par levels regularly and make adjustments as needed.
- Follow the first-in-first-out (FIFO) rule. This vital principle in inventory management is pretty self-explanatory. The stock you get in first should be sold first. Not your newest stock. This concept is essential when selling perishable products to avoid spoilage. However, FIFO is also a good idea for any type of inventory. When something continuously gets pushed to the back, you run the risk of that item being worn out, expired, or out of style.
- Focus on business Inventory management is about the people along the supply chain just as much as technology and products. Therefore, it is crucial to maintain good relationships with your suppliers. This relationship can be beneficial someday when you have a problem to solve.
Chances are you’re wearing multiple hats in your business, and not all of them are roles you consider to be your core strengths. Let the team at Hayes & Associates help ease your concerns and be your trusted financial partners. We can help with everything from strategic planning and forecasting to accounting, payroll, and billing/collections. In addition, we offer specialized expertise in various professional service categories, and our team is eager to learn how we can help your business grow.
