Inventory is a very important component of any business – without it, your company cannot deliver on sales. Yet, having too much stock on hand can be considered a risk, especially for businesses that deal with perishables. Striking a good balance and having the right amount of inventory available is an asset to any business. It is important to know when certain items are running low within your business so that you can restock in time to keep operations running smoothly, whether you’re running a bakery, or operating an eCommerce business.
The importance of adequate inventory management
Inventory management allows a business to secure the stock needed to fulfill orders without delay, while keeping wastage in the form of excessive unnecessary stock and inventory carrying costs, to a minimum. Poor inventory management and an inaccurate picture of your stock on hand pose a devastating risk to both the sales and accounting legs of your business and tarnish a business’s ability to make strategic decisions for business growth. Here’s why an efficient inventory management system is required within any business:
- Avoid stocking up on the wrong inventory: It is common for businesses with inferior inventory management systems to stock up on just about everything their business uses. The problem with this is that having too much inventory of the wrong items on hand can be detrimental to your business. Products that don’t move quickly affect the liquidity of a business, which might hold a business back from investment opportunities when they arise.
- Avoid having insufficient availability of required supplies: Not having the availability of stock that does sell is just as bad as having too much of the wrong stock. When your business isn’t managing its inventory correctly, it is a common problem for businesses to overstock on items they don’t need and underestimate the amount of inventory that their company sells out on fast. This creates stalled production of required items, credibility issues with clientele, and ultimately leads to a potential loss of sales.
- Avoid an inaccurate understanding of the supply and demand: When you do not have an adequate inventory management system in place, your business will fail to understand the purchasing behavior of your clientele – do they buy more seasonally, and are there opportunities to upsell clients who purchase certain products? A lack of a system to provide this kind of information will lead to missed opportunities to meet the needs of your clients and ultimately create a loss of profits.
Implementing inventory management software
There are a variety of methods that businesses use to manage stock. These range from manual recordkeeping through spreadsheets and online tools, to making use of software that automates the inventory management process.
For adequate inventory management, precision, accuracy, and automation are among the most important things a software should offer. Without it, you have a skewed idea of the stock and financial numbers within your business, which not only places your credibility with clients at risk but could also lead to inconsistencies in your accounting and ultimately the possibility of penalties with the IRS.
Managing inventory with Netsuite
NetSuite offers advanced inventory management functionality. Relying on spreadsheets to track inventory is challenging as it would require a staffer to manually input and keep a record of all transactions. This person may miss certain transactions due to poor communication from various departments, or when they’re not fully focused or absent from work. This makes manual record-keeping unreliable. With NetSuite, everything is automated. The software offers real-time inventory visibility across different stores or regions, making it easy for you to track inventory across different locations within the same software.
Once set up correctly, NetSuite Inventory Management increases the reliability of the numbers, by automatically tracking inventory levels, orders, and sales throughout the inventory life cycle. The software also provides efficient data with the stock control insights needed to make informed decisions that will serve both the needs of your clientele and your profits, by allowing your business to offer smarter sales. The data provided by the software also enables you to know the value of your inventory at the purchase or sale price and know how well a product is selling. This can be seen at a glance thanks to the software’s customizable reporting ability, meaning that you can even get clear visibility into any inventory liabilities, like excess or slow-moving stock, at the click of a button, giving you the opportunity to make changes, increase marketing or offer promotions on these items. The best part is, that despite having multiple users, inventory-related information within your business at large, will be updated across the platform.
NetSuite Inventory Management is designed to secure the correct amounts of stock and keep wastage at bay while enabling you to make informed business decisions. The hardest part of implementing the software is having it set up to integrate and record the necessary items correctly. At Fusion, our team of CPAs is well-equipped to set up the inventory management software for any business industry. Getting the setup wrong places the credibility of your numbers at risk again, which has a ripple effect on the bookkeeping and overall decision-making of your business. Get in touch with our team of CPAs to have this software set up for the inventory needs of your business.
This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive