The Relationship Between Sales & Inventory Management

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This article was updated in March 2023 to reflect current trends, market statistics, and new information.

With the surge of eCommerce, retailers are facing extreme pressure to maintain profit margins. In fact, poor inventory management has been a leading factor in how many businesses collapse. Proper investment in inventory control is a necessity to avoid losses and to sustain profitability.

This is where the relationship between sales and inventory control is important because a business owner can only know what inventory stock is available if what has been purchased and what has been sold is known.

sales and inventory

Sales and inventory management are two sides of the same coin; if one isn’t working properly, the other will suffer.

Recording sales and inventory control

Proper recording of sales lets the business owner know when inventory stock is running low, whether this should be reordered, if so, how much to purchase and so on.

Accurately recording a sale every time fundamentally eases this planning process with the aid of a sound inventory management system. It can help identify issues such as under-stocking items and over-stocking items that can directly affect cashflow.

In turn, this helps the business owner keep track of the profitability of a business and make decisions about the future of the business.

Higher inventory turnover rate

Inventory turnover is a key component in testing the health of your business. The more inventory that moves off the shelves, the better your sales are going.

However, it’s not just about moving the inventory off the shelves, it’s about how it moves off the shelves. How fast are your warehouse employees able to find what they are looking for? Is it easy for them to get a product picked, packed and shipped or are there obstacles slowing them down?

If fast-moving goods are located far away from the shipping area, employees waste more time going to pick up these products, more frequently, from the shelves. If you can identify which product sales are moving quickly, strategically layout your inventory management design to suit.

If you can decrease allocation time in the warehouse, a customer has higher chances of receiving their product faster. This leads to customer satisfaction and increases the likeliness of them being return customers.

Improve customer loyalty

Customer satisfaction spans far beyond just receiving packages quickly. Building trust and loyalty with customers also doesn’t happen overnight; you have to sell a good product.

Quality is important, and sometimes it’s actually about the quantity too. Customers dread the ‘Sorry, out of stock’ message — and for good reason.

Good inventory management strategies help you keep on top of replenishing stock. With healthy stocks that reflect demand, you can keep the ‘out-of-stock’ messages to a minimum and keep your sales growing.

If customers know they can get what they want, and in the amount they want from your business, it will support their loyalty.

Prevent overstocking

Issues with inventory management can arise when there is too much stock and sales aren’t moving fast enough. If your warehouse reaches capacity but the sales have slowed right down, this can negatively impact your cashflow and sales.

If you really need to move this stock, you might resort to selling it at a severely reduced rate. This means less profit from sales.

However, the inventory has to move before it becomes totally obsolete and you can no longer sell the product at all.

Find complimentary items

Upselling can be a huge boost to revenue. Having a cloud-based inventory system in place allows your sales team to be able to locate precisely what their customer wants, and quickly find complimentary items that are available immediately as well.

For example, if the customer is looking for a washer and dryer set, the salesperson can look at inventory to see which matching sets are available for immediate pickup or delivery.

Or, if the customer is looking for matching kitchen appliances, the salesperson can quickly find out which coordinating appliances are available to be delivered and installed at one time.

Having this information on hand makes it easier for a salesperson to close a large sale. It also makes the customer happier, as they don’t have to wait for bits and pieces to come in, but can instead get everything they want all at once.

This equates to great customer service, which leads to word of mouth referrals for your business.

sales and inventory

Accurate, real-time stock levels help sales and inventory systems work together to prevent overstocking or understocking.

Level up with better inventory management

Having a sound inventory management system has many benefits associated to sales and inventory.

Take for example, when a sales team member records a transaction, inventory stock balances are adjusted. The only other circumstances in which a product is removed from inventory stock at the point of sale are damage or theft.

To properly allocate income and loss, the connection between sales and inventory management must be strong, and team members must adhere to any inventory stock requirements regarding sales, damages and theft.

A reliable inventory management system is not only essential to keep more accurate levels of recorded inventory sales, but more so when coupled with the complexity of other sales channel. Most POS systems are integrated with an inventory tracking system, for example using barcodes or RF tags to ensure each product is properly accounted for.

As long as each item gets properly scanned or recorded, inventory stock levels will be accurately maintained.

Damaged items must be removed from recorded inventory stock levels and the same for items lost through possible theft — in a controlled way by authorised team members.

Fostering the relationship between sales and inventory

Although there are other ways of adjusting for inventory stock levels post-sale, best practices create a follow-up POS procedure and promote a strong understanding between sales team members and inventory management team members.

While a separation of duties is important for maintaining checks and balances, each department needs to understand all related procedures at a level that is appropriate. This way sales and inventory management departments can work together to ensure that items are being properly accounted for.

Otherwise, inaccurate sales figures and inventory stock levels can lead to inaccurate earnings statements that ultimately affect the business’ bottom line and future.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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