Any company dealing with Inventory whether this is manufacturing or finished products has to plan and consider a lot of areas within their business, this ranges from production, warehousing, distribution, supplier issues, staffing, stock control, all this and more has a big affect on managing the day to day running of a business.
Managing the flow of goods and deciding when and where to warehouse your goods is by no means a simple task. Having funds tied up in Inventory can lead to a lot of businesses encountering cash flow issues. Balancing demand and lead times on products along with trying to meet your customers needs can be a tough challenge for many companies. Inventory management plays a big part in making sure that the stock you hold is the stock you will be selling and not necessarily stock purchased to cover all lines of products in a just in case scenario, no one wants to be left with products they can’t sell even at a discount, reducing your margins can lead to financial disaster in your business.
A lot of companies now operate on the basis of ordering products once they have the sales order, this doesn’t tie up your cash having a warehouse full of products along with trying to second guess what products you might sell or the other costs incurred in housing these products. With popular lines some companies may consider as ‘safety stock’ it might be necessary to purchase some stock as the lead time might be such that if you don’t your customer might go elsewhere.
Having the correct controls in place in paramount in any business. If you are a business that keeps a certain amount of stock in your warehouse you need to know that the stock turnaround is correct. This can be based in FIFO (first in first out) using this method guarantees the oldest stock leaves the warehouse first and should eradicate obsolete stock. Periodic stock checks should be completed especially at year end making sure any damaged stock is accounted for and if necessary written off. Having the ability to check a product is in stock, the availability after sales orders have been processed but yet to be delivered and what’s on order with your suppliers at any moment in time is valuable information and helps you monitor your stock position.
When making as sale you need to make sure that not only the sales price is correct but the cost price of you product has also been recorded correctly. The cost price of you product at point of sale can be based on FIFO or, an average cost. An average cost is based on the total financial amount of stock of a certain product divided by the number of units held. This price may also include the distribution cost of your products or a percentage.
Choosing the right software to manage your Inventory
Deciding on the right software to manage your Inventory can take time as there’s a lot to consider. There is now a lot of choice of software for SME’s and Professionals to choose from whether it’s desktop or accounting software in the cloud.
Most companies look for a package that is fully integrated, a complete software package. Having the ability to raise purchase orders based on your sales orders, registering the stock as it arrives sometimes prior to the invoice, dealing with consignment stock, special prices for high volume orders, multiple delivery locations for each customer, these are all strong considerations when choosing the right software.
It’s highly recommended to test a system, making sure it performs the way you want it to, gives you the correct information, has relevant reports, supporting minimum stock levels etc. The type of business your running may have the necessity for product or batch recall so identifying what has been sold and when could be a crucial factor for you when making your decision. You also want a software package that is easy to use, has guaranteed training and support when you and your team need it.