If you think that the goal of good inventory management is to find your products easier, think again. Not only does an inventory management system allow you to place your products strategically, its primary function is to maximize your productivity so that you can save a great deal of time and most of all, money. Read on to discover how and why!
Not implementing inventory management processes could have considerable consequences on your fund entries and disbursements and on the smooth operation of your business in general. By not strictly monitoring your stocks, you could make the following two mistakes:
Effective inventory management limits your storage costs, improves your liquidity management and prevents fraud (how can you identify theft if you are unaware of your quantities?).
Your ability to manage your inventory efficiently also affects the quality of your customer service and your capacity to build customer loyalty. By making sure that you always have the appropriate quantities in stock, you can meet demand and avoid frustrating your customers, and you don't pay additional storage costs and you don't risk losing products.
There is more than one way to approach inventory management:
If you opt for specialized software, you have to consider the inventory accounting system that best meets your needs: periodic inventory or perpetual inventory.
Inventory is updated periodically, generally at the end of a period or a fiscal year.Benefits
Periodic inventory systems are a more affordable option for growing businesses. It is also an easy and more flexible method which allows adjustments to be made until the end of the period or the fiscal year.Restrictions
Quantities in stock are not updated in real time; you have to wait until the end of the period or the fiscal year to obtain the exact quantities.
Also, with periodic inventory the cost of goods sold is only known at the end of the period.
Inventory is updated with entries and sales of stocks (real time).Benefits
This system allows you to know the exact quantify of goods in stock at any time, and simplifies analyses and decision-making.
Also, the income statement with perpetual inventory presents the cost of goods sold from the time of the sale. The results are therefore always up-to-date, contrary to periodic inventory.Restrictions
Transactions must be processed following the movement of goods (reception and sale) in order to have the real costs on hand at all times.
This management method is also less flexible and adjustments cannot be made as easily as with periodic inventory.
Yes, implementing an inventory management system for the first time or replacing your Excel file with a real application will require an effort on your part. But good inventory management practices are vital to ensuring the sustainability of your business and to get a good overview of its financial situation. This overview is what allows you to make better decisions and foster your growth.
As developers of accounting and management software, each day we help over 40,000 Canadian SMBs manage the essential aspects of their operations.
Whether you are starting up or growing rapidly, we want to work with you by providing you with solutions adapted to your reality, which will help you get the most from your entrepreneurial project.Discover Acomba
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