One key aspect of doing business that the new or old entrepreneur should know is Inventory Management. In its most basic form inventory management is about knowing specifically how much material and or goods you have in stock and where they are located.
There are different types of inventory; for the retailer its how much of each item that he has available for sale that is on hand. For the manufacturer, its both raw materials, work in progress and finished goods. Whatever form your inventory takes it represents cash and must be managed accordingly. Too much or too little inventory can ultimately cause your business to fail. Here are some tips you can implement right away to help you manage your inventory more effectively.
Establish a system for tracking inventory
Most accounting software has some inventory management capabilities which can track your inventory in real time. The one you use will depend largely on your business. If you have a retail business, you may want to find an accounting software with Point of Sale capabilities. A manufacturing business will need software which allows them to track raw materials and convert them to finished goods. Managing your inventory from spreadsheets or lists almost always never work because they are dependent on someone remembering to update the information – This exposes you to errors and dishonesty.
Establish a process for taking stock
Some businesses only take stock count once per year at their financial year end, while some conduct stock count on a weekly monthly or quarterly basis. If you have lots of inventory, a full stock count may not be practical more than once per year; however, you may want to do stock counts of specific items on a regular basis. For example, large supermarket conduct stock count on specific items on a weekly basis to check for pilferage.
Establish a process for storage of stock
Inventory warehousing has become more of a science, so much that many businesses employ a first in, first out methodology of valuing and storing their inventory – This way they are not stuck with stale dated or outdated items in their inventory. The newest items therefore will always be stored furthest from where inventory is pulled.
Establish a process for ordering inventory
While there are many software solutions available for the entrepreneur which can aid in inventory management, they will still need to have systems in place to maintain an optimal inventory level. A good accounting software will allow you to set reorder quantity levels and then alerts you when inventory has reached that level so that you can reorder. This ensures that you do not run out of items, you do not overstock items, you can better control costs, forecast future inventory needs and space requirement. A good system will also help you to manage defects or returns.
Establish Compliance procedures
Document standard operating procedures to make your day-to-day warehouse operations a uniform process. This ensures that your inventory gets handled the same way, all the time. Procedures to develop, surround issuing purchase orders, delivery of goods, receiver of goods, bill handling etc.
How do you manage your inventory? Share with us by leaving a comment below.
