Many companies settle for an annual count solely for the purpose of ensuring accurate bookkeeping. But such an approach ignores the fact that inventory management carried out systematically, directly affects the company’s cash flow. Therefore the rate of business growth. Inventory management allows you to make informed decisions both about buying new goods and about the amount you can sell. It all begins with organizing. Whether that is labelling or storing. In this case you may want to look at Checkweighers.
Inventory = money.
You paid money to buy the goods and you will get more money when you sell the products. Therefore, when you have unnecessary inventory you are actually “laying down” money in warehouses, literally. Beyond that, smart management saves you money in 3 ways:
- When you sell products with an expiration date (such as food or care products), you guarantee that you will not reach a situation where you will have to dispose of expired goods.
- By managing inventory you avoid a situation of dead inventory – goods that can not be sold because it is no longer in demand (for example, items that are no longer in fashion).
- When you hold a limited amount of inventory, you pay less storage expenses (which are defined as variable expenses ) and save money.
What exactly is inventory management?
Inventory management is designed to ensure that the right items are available to you, in the right quantity and at the right time. For any business, the optimal method for it.
Here are some techniques that are proven to be especially effective for small businesses:
- Use the FIFO method – First In First Out. According to this method, the first product to enter is the first product to exit. This method is especially effective when it comes to expired products. But even when this is not the case, it is advisable that goods are not stored for too long in order not to be damaged. The most effective way to apply this method in the field is to add new merchandise behind existing merchandise so that the older items will be at the front.
- Make accurate sales forecasts – Optimal inventory management is an outgrowth of future demand forecasting. Challenging action by all accounts. Among the factors that will help you make an accurate forecast: trends in the industry, last year’s data, current growth rate, state of the economy, planned campaigns, signed contracts and constitute safe transactions.
- Set a ‘threshold’ level for each product – Threshold indicates the minimum quantity to be held by each product. When you detect a deviation from the required quantity, a notification is made to make a purchase. Naturally, the threshold levels will be determined by the demand for the product and by the speed at which it can be added.
- Perform periodic inspections – Even if you manage inventory using the most innovative computer software, it is very important to conduct periodic inspections. The items will be physically counted. In this way you can be sure at all times that what you think you have is what that you have practiced.