It’s hard to dispute that Microsoft Excel is a useful low cost tool for new businesses. As a business owner, you are able to record all transactions and movements of inventory on spreadsheets, create graphs for analysis, and update your data any time by editing the spreadsheet. Despite this appeal, using standard spreadsheet programs like Excel as a permanent part of your inventory management system is a risky decision. Ultimately, it is not specifically designed to manage inventory, and this becomes evident to many business owners over time, too late for some. Below are 10 reasons why you might like to consider moving on from a standard spreadsheet program to more specialized inventory management software.
When you run a lemonade stand every Saturday afternoon, making 15L of lemonade and selling 120 cups at $2 each, it’s fairly easy to track your sales, cost of goods sold, inventory turnover, and other metrics using one or more spreadsheets. Even then it’s not easy: you have to make sure you correctly record every sale made, any stock lost by accident, and any discounts given. A diligent person may be able to run a small business like this on Excel, but as soon as things get complex: different products being sold; inventory being sourced from various suppliers; multiple stores or warehouses, its unrealistic to expect a standard spreadsheet program to allow you do this, as that is not what they’re designed for.
Using spreadsheets opens your business up to human mistakes. Even the most skilled office professionals are not 100% accurate, and ask yourself: is even one mistake in every 100 data entries acceptable? Even if only 1% of your data entries are wrong, this could translate into many hundreds or thousands of dollars lost, depending on the error. Specialist inventory software is superior in this sense because it automates much of your inventory process, eliminating a large amount of potential for human error.
To compete in a tough marketplace, you have to be able to respond to opportunities when they arise by expanding output, or minimize losses by reducing output when times are slow. This is impossible to do without strong inventory visibility. Specialized inventory management software will do this because it provides inventory data in real-time, but this is not possible with a simple spreadsheet system.
If you want to be successful in a competitive marketplace, you need to keep your eyes on the future. When making forecasts and strategic plans, would you rather be making decisions from tables or charts you have created within your spreadsheets from scratch, or automatically generated results and graphical displays that are specifically designed for inventory management? To make the best decisions, you need to have the clearest, most accurate, and most relevant information to do so.
Inventory management software allows you to completely integrate your operations, meaning sales staff know what inventory is on hand or still being manufactured, and your suppliers know exactly when they need to start new production runs to meet your orders. This high level of integration makes thing run much faster. For example, an order can be placed automatically as soon as a sale is made, whereas comparatively if a spreadsheet program is used there will be delay – you will need to process your information and work out that this is necessary.
When you are running a flexible, well planned, and well-integrated operation, the natural result is that you will be keeping your customers happy. Stock-outs will be minimized, and sales staff will be able to make firm commitments on delivery times, which themselves will also be minimized. This will allow you to solidify and grow your customer base, which is fundamental to the longevity of your business.
When you are able to expand your business to new stores, new cities, and even branch out internationally, it’s normally a positive sign of success. When using spreadsheet inventory management however, this can be a disaster. While some spreadsheet programs do have some collaborative functions, they are largely poor when it comes to multiple users constantly sharing information. This deficiency is exacerbated the more users and different types of inputs are required, with synergy likely to be hurt, and a higher chance of errors. Inventory management software excels here because it is designed to accommodate collaboration.
When something within your operations does go wrong, the most important thing is to work out what happened as soon as possible. This is difficult in spreadsheet systems where data is often decentralized, it is hard to locate data, and data isn’t constantly backed-up by users.
Susceptible to fraud
Another striking difference between inventory management software and a spreadsheet system is the latter’s lack of controls, which makes such a system vulnerable to fraud. A typical inventory management software package will allow a manager to control who can use the system, and track which user has done what. This helps prevent crippling events such as spreadsheet manipulation, which has cost some firms millions of dollars in the past.
Spreadsheet systems aren’t as cost effective as you may think
As mentioned above, one primary reason a business will go for Excel or another such spreadsheet program is the perceived cost advantage of doing so. However, with cloud software delivery now possible, today’s inventory management programs are available at a fraction of what they used to cost businesses. Many providers offer a free trial, which means that trying such programs to work out the true cost-benefit of employing them for your business is more than worthwhile.
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.