Within Bookkeeping, Inventory is the Lifeblood of your Business.
Inventory is the most significant asset on your balance sheet and your company’s biggest revenue-generator. Within bookkeeping poorly managed inventory can do severe damage to your bottom line. Without clear strategies for streamlining the in and outflow of goods, businesses will have trouble meeting their customer’s demands and will see mismanaged stock corrode their profits. Follow these tips to ensure your business’ bookkeeping doesn’t fall prey to standard – and costly – inventory problems.
Implement a system for accurate stock tracking.
Whether you have a modest stockroom or a large warehouse, it’s essential to know precisely when products are coming in or shipping out so you’re able to re-stock efficiently.
Factor in lead time when calculating your basic stock so you don’t run out of a product before new supplies are delivered – disappointing your customers and missing out on revenue opportunities.
Implement an automated inventory management system to track fill rate and inventory returns for all products, and get a better handle on exactly how much stock you have at any given time.
Avoid excess inventory.
Excess inventory is a financial drain on your business in more ways than one. It costs money in extra overhead, increases insurance costs, and reduces your liquidity. Instead, allocate more profitable product to the space taken up by additional merchandise.
Here are a few ways efficient inventory management can help avoid the problem of dead stock:
Don’t purchase large orders of discounted stock simply because they’re discounted. It might take much longer than anticipated to sell the products and turn a profit – in the meantime; your order gathers dust in your storage room.
Calculate and stick to a realistic safety margin so you only buy what you are reasonably sure you can sell. A sound system for tracking sales and profits – and checking it often – is essential to making better buying decisions.
Liquidate your overstock by selling products at discounted prices. You also might consider returning excess inventory to your vendor (it may be worth it even if you have to pay a restocking fee).
Prioritize your inventory needs.
You can avoid inventory mismanagement by putting better systems in place to prioritize your inventory needs. You should always know which products have the highest turnover ratios and ensure those items are always on hand.
One approach is to divide your inventory into three groups (A, B, and C) based on their dollar impact on your business. You’ll get a clear sense of which items to purchase more and avoid needlessly tying up cash stocking up on the non-essentials.
Final tips for better inventory control within bookkeeping.
If you’re looking into switching to or upgrading your accounting software, look into a solution that includes inventory pricing and availability features. And be sure to invest in training to ensure your staff knows how to use inventory tools – and has a firm handle on overall inventory management practices.
With enhanced customer data at your fingertips, your business will earn a reputation for personalized service. For example, you’ll be able to respond quickly when a customer calls with a question about a product or an order. And you’ll be able to suggest substitutions and offer valuable add-ons based on their buying preferences, so upselling becomes a snap.
How will you use accounting software to grow your small business?
Savvy business owners take the first step toward better profitability when they stop thinking of accounting software as simply a financial management solution and start thinking of it as a comprehensive tool for business growth.
You may be surprised at the many ways accounting software can help you better serve your customers or improve your sales strategies when you look at its true potential.
Now that you have a handful of ideas for better use of your accounting software, what will you do differently to enhance customer care, improve your profits and continue to grow your business?