Increase Your Sales with Smart Inventory Management Practice
Managing inventory is essential for businesses of all sizes, and it can help to increase your profitability. Your profit is based to a large degree on how well you manage your inventory. Managing inventory more effectively can lead to more sales, improved cash flow, and less need for credit. Here are some smarter tips for managing your inventory to increase profits.
Track Inventory Properly
The most important part of managing your inventory is tracking it. Proper inventory control involves more than buying new inventory, and instead you need to know what you have to buy, when, and how much. Tracking inventory can be done manually in small businesses, but many businesses now decide to use specialized asset tracking software to make the task a lot easier.
An inventory tracking system will let you know which merchandise is in stock at any given time, what you have on order, when inventory is arriving, and more, helping to save you time. It provides you with better information than a manual system, saving effort on your part. When you look for software, you may want to find one that comes with the ability to scan bar codes to make the process of keeping track even easier.
Avoid Having Excess Inventory
One of the ways that inventory can cost you money is when you have too much in stock. You can reduce the amount you invest in your inventory by analyzing the demand and trends to help you make better decisions. A good management system can help you to do this effectively.
This is especially important if you have seasonal product lines, but it is important in any industry. Having too much inventory in stock costs you money in terms of overhead, debts, tax on inventory you don’t sell, and higher insurance. You may also decide to slash prices to sell excess inventory, hurting your ROI.
Avoid Inventory Shortage
Avoiding inventory shortage is also important when increasingly your profitability. Being too cautious with your inventory is not a great idea, and instead you need to determine a safety margin and only order what you know you can sell.
You need to maintain sufficient inventory to cover normal demand. If you are a startup, you will have to use your business plan and estimated sales to guide you, but in future years you can use your records to make a more accurate assessment.
Make sure you take lead time into account when calculating your stock. This is the time it takes to receive a product once you have reordered it. Try to avoid having too few items in stock because this can result in lost sales. Use your sales history, market conditions, and trends, and base your decisions on these.
Prioritize Your Inventory
In addition, spending too much money on inventory can cause problems with cash flow, which is a common problem for small businesses. You should therefore prioritize by making sure you stock more of the most important inventory as part of your inventory management. Usually a larger amount of your revenues will come from a small section of your products, but these are not necessarily the most expensive.
Keep On Top of Your Inventory
All of these areas will help you to stay on top of your inventory and manage it more efficiently. This will help you to make better decisions, enjoy a more flexible order process, improve your deliveries, and most importantly, boost profits. If you have not yet established efficient inventory management practices, now is the time get started so you can enjoy all the benefits that come with it.
Gerald I. Rodriguez is an inventory control specialist. He enjoys writing about what works best for him. Look for his articles mostly on management and industrial websites.