Since inventory is one of the biggest assets for a company, it’s no wonder that it can impact on a company’s financial health. If inventory is poorly managed, there can be a domino effect on the company’s financial statements. For instance, if you have old stock sitting on the shelves, taking up space and not selling, your cashflow could be directly impacted. There is always the opportunity for improvement when it comes to inventory management.
Analyse your different types of inventory
It’s important to step back and take a look at the different types of your inventory such as raw materials, partially manufactured products and completed products. By analysing the buying, producing and selling stages of these inventory types, you’ll have a better idea of what relationships they have to your finances.
In many companies, raw materials inventory plays the biggest role in impacting financial health. Of course, this is industry dependent. If you sell consumer goods, your raw material inventory won’t be as influential to your financial performance as a manufacturing company. With the assembly industry, you have companies making cars and electronics. These are large, expensive inventory items to hold, in comparison to consumer goods which are generally low-cost. When an assembly industry can decrease their inventory, financial performance will increase.
Use online inventory management software
Online inventory management software can drastically enhance how you manage your stock and how your company performs financially. With online inventory management software, you will have a more in-depth understanding of how your inventory moves off the shelves. You’ll be able to identify the general health of your inventory stock in the warehouse and where problems lie. By looking at previous quarters and years, inventory patterns will become clearer.
Use this information for financial planning and forecasting. If you can minimise the amount of dead stock or stock-outs by fine-tuning your inventory numbers, your financial performance will improve. You’ll realise where you can plan orders better and reduce inventory to an optimal level.
Online inventory management can also provide a business with real-time updates. These updates can enhance communication and awareness throughout the business. This up-to-date information can help decision-makers with financial choices about products, demand, and inventory shipments. This can help a business remain competitive in the market and build their brand. By managing your inventory well, you can stay competitive and increase revenue.
Reduce stock taking errors
When a company calculates their inventory, they need to ensure that there aren’t any errors. The problem with errors is multifaceted. Let’s say you miscounted 20 pieces of inventory stock, each week for an entire year. That’s 1,040 items of inventory over an entire year that you’ve missed! This would impact the cost of goods sold, profits and income of a company.
Essentially, you need to have a clear and streamlined tracking system for the best inventory management in your warehouse. Seek out digital tracking options and don’t shy away from technology. When it comes to inventory, advanced tracking methods keep companies informed and their finances healthy.
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.