Managing your inventory efficiently as a small business is essential in providing you with control over each step of the process. Utilizing inventory management controls can provide you with up-to-date data on various facets. Using controls should be advantageous for keeping a high customer satisfaction level and ensuring you have enough stock available to generate the best margins. Avoiding financial losses due to excess stock, spoilage, or losing loyal customers can be achieved by utilizing the appropriate inventory controls.
Using an inventory control process is essential for streamlining and ensuring you can monitor and react to each essential element in your supply chain. Combining your process with a robust software solution should help make your inventory control system highly efficient. One of the most basic but critical control mechanisms is the tracking of your assets. We have assisted companies who use NetSuite, Xero, QuickBooks Online and WebGility, as well as other e-commerce software solutions.
Implementing electronic tracking as one of your controls for inventory can be helpful if you want to know where each asset is currently located and where it’s going. Utilizing RFID technology or barcodes can help make this process more straightforward and efficient. Numbering your inventory locations and each item in NetSuite or similar software should make it easy to identify each asset and know its current location. Having this control in place safeguards against having a customer try and order a product and discover it’s not in stock. You may quickly lose a loyal customer this way, which cuts into profits.
Receiving each item of inventory changes the amount of stock you have on hand. Transferring this data by utilizing an e-commerce software solution helps make it quicker and more efficient to record and monitor. If you can stop inventory loss at this key transition area, you can help ensure you keep the most profits as possible. Reviewing the number of items you have available for customers to purchase should also be included as a step in your inventory control process. Monitoring your current inventory helps ensure it doesn’t become dead stock and begin to lose value or get lost. Storage space is a precious factor where you can lose profits if you aren’t utilizing it effectively.
Another control mechanism that can be utilized for inventory management is regular audits. Using software helps discover when too much inventory has been ordered, as well as location errors, or overstatements of current stock. Analyzing this control can help reduce errors and increase efficiency. It can also spotlight areas where communication may be lacking from one location point to another. Maintaining a firm grasp on your inventory can be made even simpler by revealing weak points that appear when a periodic audit is completed.
Securing your inventory is another essential control mechanism allowing you to make sure valuable stock doesn’t walk out the door. Keeping your inventory in a central location can help make it more efficient to monitor. Adding security codes, cameras, and locks to the site can also help add extra protection. Incorporating a count of inventory when it’s delivered will help you discover shipping discrepancies that don’t match purchase orders. Remedying this situation can be done quickly by using a software solution. You may also want to implement periodic counts of your inventory by analyzing small sections to see if consistency is being maintained.
Implementing specific inventory management controls won’t do you much good if you don’t monitor and tweak them periodically. Doing so can help you attain an optimal inventory level to sell to customers without purchasing or making too much inventory. Avoiding stockouts and not tying up too much money usually requires repeated analysis.
Having a seasoned CPA who is highly proficient with inventory software handle this aspect may help reveal valuable information. Choosing the correct methods to help you determine the amount of money you’d like to spend on current stock includes essential factors such as warehousing costs or if the product is perishable. Getting assistance from an experienced accountant should help you come up with an appropriate number.
Managing your inventory at reordering points is another area where you can implement one of your inventory controls and utilize your data efficiently. Defining your purchasing procedures by analyzing factors, such as customer demand or obsolete stock, should help you maintain an adequate number of items in your inventory without overspending. Monitoring your reorder points can also provide information on how well suppliers are providing you with stock. Taking this data to manage supplier relationships can open up conversations associated with receiving discounts or returning stock that wasn’t sold.
Having a good relationship with suppliers can be critical when you need to restock inventory quickly if demand suddenly increases for a product. Forecasting, by utilizing a reorder point formula or the help of an outsourced CPA, can also help provide you with the right amount of safety stock.
Implementing specific techniques and actions to organize your inventory and determine how well you have successfully ordered the right number of units may also be beneficial. Using the best KPIs to measure the performance of your business to help determine these numbers may make it more efficient. Evaluating short-term and long-term goals can help you see if you are achieving the right mix of inventory, or ending up with excess or obsolete items.
Using stock-to-sales-ratio, inventory carrying costs, inventory turnover, or order cycle time KPIs may help you analyze how well your inventory control management works. Determining the appropriate KPIs to use may be more straightforward when you get assisted by a CPA who works with these indicators regularly. Incorporating them into your inventory control processes should provide even more data you can use to help scale your business.
Ensuring you have correct inventory data for your accounting and tax planning requirements can be crucial. Maintaining specific inventory management controls and using them to record each data point should provide you with higher accuracy. Knowing you are using the correct inventory valuations should make it more efficient to match your inventory’s physical value and the recorded value in your accounts.
Getting assistance with this task from an experienced accountant who regularly works with accounting and inventory management software can definitely be advantageous. They are familiar with the capabilities available with each platform and can help you make the best decisions for your business.
Here at Fusion CPA, we frequently assist companies with software integration as well as various financial services for e-commerce and retail companies. If you need assistance defining your specific controls and incorporating software into your management system, contact us. We’d be happy to start a conversation and see if we can be of assistance.
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