Every business, no matter how big or small, needs to come to terms with their inventory. Inventory control is essentially maintaining the appropriate quantity of each item in your inventory throughout the year. The number of each particular product in a businesses inventory should reflect the expected sales of that product. Furthermore there should be an appropriate assortment of different products in order to reduce the risk of “putting all your eggs in one basket” by only having one or two stock items. Inventory control can be implemented manually, which is time consuming, or via a cloud inventory application, which significantly reduces the time cost.
Here are some basics that small businesses should avoid:
Excess Stock — This should be avoided at all costs. Excess stock of particular products is very bad for a business. There are a number of reasons for this. Firstly, excess stock takes up space on shelves that could be used for more profitable products. Secondly, excess stock will contribute to the taxes you pay in personal property tax and will tie up cash in products that could be better used to reinvest in the business. Finally, if you have excess stock of seasonal products, you run the risk of having to abandon the stock at a financial loss if it doesn’t sell within the seasonal timeframe.
Cash Flow — A lot of small businesses struggle with cash flow issues due to having cash tied up in inventory. The reason this occurs is because they don’t analyze how their products are selling. Certain products will inevitably sell better than others. Eventually the products that sell well will run low, but the cash is tied up in products that aren’t selling and so the business can’t buy any more of that fast-selling stock. It’s extremely important for businesses to identify where the majority of their revenue is coming from. When they have done so, they must prioritize these items. Aside from this, another way of freeing up cash is by simply holding less stock and placing orders more frequently, but for a smaller quantity of stock. This allows cash to be reinvested in other areas of the business or simply to free up cash for cash-flow purposes.
By following advices given above, small business owners can reduce the dangers of ineffective inventory control considerably. One can delve a lot deeper into inventory control by looking into a reliable inventory control software or inventory consignment app, but these principles will help small business owners to make a start in controlling their inventory.
