Should You Integrate Accounting and Inventory Management?

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What many companies dealing with inventory stock may not consider is the business value gained from an integrated accounting and inventory management system. On one hand we have inventory management, which is about knowing what you have in your warehouse and where your inventory stock is located. However, unless it is effectively integrated with your accounting systems, an inventory management system alone cannot ensure the inventory stock asset value on your financial reports matches what is physically in stock — at least not without manual intervention and reconciliation.

As a solution to optimise inventory management, best practices show leading companies integrate their inventory software directly with accounting systems. This integration provides a competitive advantage with abilities to plan effectively, execute predictably with customers and minimise labor costs and errors associated with time intensive and manual reconciliation. Here are three key benefits of integrating inventory management software with accounting software.

Inventory Optimisation

Having the right amount of inventory stock on hand is vital to both customer and investor satisfaction. Customers want products on demand and if you don’t have those products available you risk losing the sale, and investors would prefer less working capital tied up in inventory. Balancing these conflicting objectives is difficult. Activities such as storing, counting and reworking inventory stock tie up additional working capital. Planning for the right level and amount of inventory requires your sales order, purchase order and planning systems to have real-time visibility of your inventory, so you can react accordingly.

Supply Chain Visibility

Many companies are using supply chain partners to manage their inventory levels and customer shipments. To do so effectively, the inventory system must be integrated not only with the company’s accounting systems, but also with supplier or third-party logistics systems. By seeing your company’s real-time fluctuating inventory stock levels, suppliers can ensure their product is available at your warehouse when your customers need it. In addition, supply chain partners are realising the benefits of integrating each others systems; Electronic Data Interchange arrangements are becoming increasingly common for a competitive edge. EDI arrangements allow vendors, customers, and other partners to exchange information seamlessly and automatically, reducing overall workload and the possibility of errors. Not to mention, the increased visibility allows for smoother processes and better decision making throughout the supply chain.

Accurate Financial Reports

Accurate annual reports and tax returns are critical for your investors and the government. Inventory stock value can be a significant portion of your stated assets and the recorded value in your books must match the physical value in your warehouse. All companies eventually have to reconcile inventory with accounting. An effective way to ensure financial integrity in your company reporting is to integrate the transactions in your inventory system with your accounts.

In today’s fast paced would of business, things are continuously changing so much so that many companies, especially SMEs, are reluctant to commit to new technologies. Inventory and accounting system integrations should be scalable and happen in real-time. With visibility over things happening in real-time, customers and supply chain partners have oversight and ensures that your financial reports are accurate.

Many businesses can benefit from an inventory management system that integrates with accounting. Some will even find that it’s difficult to be competitive without one. The more moving pieces that are involved in the way your company orders, stores and processes inventory stock, the more your company will benefit from an integrated inventory management system.

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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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