If you are a business owner, keeping track of your inventory is one aspect of your business that you would like to be perfect as soon as possible. Managing inventory involves more than hiring an experienced employee or implementing a creative system. In any case, anticipating common mistakes in tracking inventory and knowing how to address each one will help ensure that your business is in tip-top shape.
Surplus of Supplies
Entrepreneurs are sometimes afraid of not having enough supplies for their bestselling items. When this happens, working capital gets tied up and products that are not sold quickly enough can be subject to damage and depreciation. To avoid this situation, and to improve cash flow these items are sold at a discount where the business owner loses revenue.
Looking at your monthly history is one way to estimate your supply needs. If in the past year you were able to sell 50 products for each month, you are more than likely to sell 50 products for the coming month. Of course, you need to consider the seasons of the year. By looking at the monthly history, you quickly learn which items are in demand for a particular season.
As much as possible, you would like your records to be error-free; however, the human component of the process makes that impossible. Even an experienced employee will have the occasional slip up during order fulfillment or shipping receipt. You cannot also rule out the possibility of theft.
Consider using product ordering and inventory management software to effectively keep track of your stocks. If you are a supplier who is in constant contact with your manufacturer, recommend the software to facilitate the processes involved in ordering and receiving items. Also, you can use bar code scanning and electrical data interchange to significantly reduce pilferage and errors.
Lack of Prioritization
More often than not, a huge amount of time and resources are allocated in order to track all the necessary details of each item in stock.
To address the issue, something you can do is to prioritize the most important items. The Pareto Principle suggests that 80 percent of the product demand will come from 20 percent of items in your inventory. Therefore, concentrate on those in demand items by conducting monthly projections and in-stock position.
Using Unsuitable Software
It is very common to see small business owners using Microsoft Excel to keep track of their inventory. However, using this process can be very dangerous. Unless you can assign one employee to manage your entire inventory, chances are you will lose important data.
Instead of using spreadsheets that are not specifically designed to handle the complexity involved in inventory management, use a suitable software like DealersCircle. Aside from providing you with a central database, the software has features that can address fundamental accounting and inventory issues.
As a business owner, inventory management is one area of your business that you want to be perfect. By addressing issues such as surplus of supplies, inaccurate tracking, lack of prioritization and using unsuitable software, you are well on your way into achieving that goal.