Understanding the flow of inventory management can be challenging, especially for a start-up business owner. From increasing inventories to knowing the turnover ratios of the inventories, one can easily get overwhelmed with the amount of information needed to be taken in at one time. That’s why it’s important to have a well-designed system to make the process easier.
Inventory is a vital part of running a business. Purchase not enough stock and you’ll miss a lot of sales opportunities and even lose some customers in the process. Acquire too much, and you’ll be risking the cash flow of your business. Having a good inventory management system on the other hand, lets you stay within the boundary of the two situations and ensures that you won’t have too much or not enough of stock.
What is Inventory Management?
Before you can design the perfect inventory management system for your business, you have to understand what it means first.
Inventory management, in the simplest form, is a system where entrepreneurs acquire, store, and sell their raw or finished products. It’s about finding the right products and getting them at the right amount so businesses can provide these products to their customers at the right time and price. It helps in achieving and maintaining a proper inventory balance.
Helpful Tips in Designing an Efficient Inventory Management System
If your business is in a start-up mode and you have questions on how to go about managing your inventory, here are some tips you can follow:
1. Categorize and Prioritize Your Inventory
Take time to learn about your products even before the launch of your new business. Once you have the idea, categorize your products into groups. The next step is to prioritize each category of your goods.
According to experts, the ABC system is still the best method when it comes to prioritizing your inventory. Category A is where the products that are high-value goods that you need only a few of. Category C is for low-valued products that are your fastest moving goods and Category B falls somewhere in between categories A and C.
2. Create an Identification System for Your Products
Now that you’ve categorized and prioritized your products, it’s important to have a proper way of identifying each of your goods. This will make it easier for you to keep track of your products. If you’re still doing inventory tracking in Excel, you’re setting yourself up for a challenge.
You may be better off with a different system. A lot of software now offers features such as serial number control and bar codes that makes inventory identification easier and more efficient.
3. Invest in Technology
Doing your audits and tracking sales manually can be difficult, and doing so makes you more prone to committing mistakes. Fortunately, it’s nothing that technology can’t solve.
Inventory management software makes it easier for entrepreneurs to track, audit, identify, and analyze their inventories while saving time and effort. With just a single click, the computer can immediately show you the data regarding your sales. From there, you’ll be able to get different information about your products. This can help you make better purchasing and marketing decisions on a moving forward basis.
4. Train Your Staff
Since you won’t be doing the inventory management alone, you’d need to invest in training trusted staff members to do the inventory. This will make them more efficient and confident in handling the stocks even during the times when you’re not there to oversee the process.
Inventory management requires teamwork, and with a well-trained staff, there’s less opportunities for mistakes. You can also be assured that the inventory accounting process will go smoothly.
5. Establish a Controlled Entrance and Exit Point
Finally, be sure to have a process where all your products’ movements can be easily tracked. If possible, control each entrance and exit of inventory and man each door. This ensures that all that comes in and out will be documented and recorded in the system. While barcode scanners and other identification systems may help, having someone competent will lead to a more efficient inventory management process.
Having Problems with Increasing Inventory in Your Business?
Having an efficient process in managing your stocks is the easiest way to take control of your inventory. Since cash is tied up in the inventory, business needs to sell their stocks quickly so they can gain the capital back plus the profits.
This will help restore the stability of their cash flow, ensuring they won’t experience any cash flow issues in the future.
If you’re planning on increasing inventory in your business, consider applying for an inventory loan. With one, you can expand product lines, re-order fast-selling products, and meet seasonal demands in your business without worrying about running short on cash. These may be simple things, but it can do great things for your growing business.