Small business owners may underestimate the importance of good inventory management. However, inventory management can be make-or-break when it comes to financial growth and long-term financial health. In this article, we explain how business owners can manage inventory to improve financial health.
What does inventory management have to do with financial health?
In essence, the more products the business can sell, the better off it will be financially. What is the key to selling more product? While the intuitive answer to this question may be to ensure customer demand is high, this doesn’t necessarily capture the entire picture.
In order to sell more product, a business must have the product on hand to begin with. That is, the business must have the right products in the right place at the right time in order to meet demand, sell the goods, and make a good return on the money expended to that carry that inventory in the first place. Essentially, the business needs to have a strong inventory management plan in place.
So now the question becomes: how can businesses stock the right type of inventory, and the right amount? The answer to this is good inventory management, which involves a number of factors a business owner must consider.
What does good inventory management look like?
A business has good inventory management if it allows for the fast and accurate processing of orders. This means that when orders come in, there are a set of structures in place to ensure that the customer receives the product in good time, without defects and that the whole process is recorded and tracked throughout.
Inventory is managed well when it allows a business to meet customer demand, while also avoiding holding on to excess or obsolete stock which offer little to no financial return. This usually means that there are little to no hiccups throughout the supply chain, and all generally runs smoothly from the moment the order is placed to the moment the final product is delivered to the customer.
As you can see, inventory management is essential to the financial health of any business, big or small. A great way to improve your inventory management is to download inventory management software, and other tools such as barcodes and barcode scanning technology.
These products can automate processes such as stock count and allow you to look up information about any stored product in real-time. This will not only help you ensure your inventory levels are sufficient to meet demand but will also help you to forecast for the future. Moreover, you’ll be able to maintain a faster order fulfilment rate by tracking the progress of an order in real-time, which will help you to identify and negate any potential risks in the supply chain.
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.