BUSY is a simple, yet powerful GST / VAT compliant Business Accounting Software that has everything you need to grow your business.
Effective inventory management is crucial for any business, ensuring that the right products are available in the right quantities when needed. Determining the optimal amount of inventory to keep on hand at any given time can be challenging. Too little can result in stockouts and lost sales, while too much can tie up valuable capital and increase storage costs.
Businesses must identify their goals and objectives to set up effective stock control techniques. This can include improving customer service levels, reducing inventory holding costs, increasing inventory turnover, and minimizing stockouts. Once the goals have been established, businesses can determine the appropriate inventory management system type. Stock control is essential to any business because it reveals how a company manages its inventory and the amount of stock available at any given time.
The following sections will cover how to set up stock control methods and choose the right type to help your business succeed.
Stock control, also known as inventory control or inventory management, is the collection of processes involved in maintaining adequate stock levels. To satisfy customer demand without causing shipping delays, preparing the proper amount of stock in hand is critical.
Stock management applies to all items used at various stages of production, from raw materials to finished goods. However, stock control entails more than simply tracking the location of products. Ideal stock control procedures ensure that capital is not wasted and aid in the prevention of supply chain issues.
Keeping track of stock may appear simple, but extenuating circumstances such as economic instability and even weather events can make predictions difficult, necessitating more advanced inventory management methods.
Given below are some of the major components of stock control:
A company’s minimum stock level is the smallest amount of any product that it should keep on hand.
When using a recommended stock control method, a business may face a revenue loss due to unmet demand whenever a stock level falls below the minimum.
The complete inventory and control stock level is the most of any item you require in stock. Keeping too much stock can be costly, so not going over may be critical to your business. Some businesses, however, prefer to keep a large amount of stock on hand for reasons such as high product turnover, long supply timelines, or anticipated price increases.
A reorder point is a stock level that indicates the need to reorder. A reorder point is advantageous because it eliminates uncertainty and keeps a company well-stocked.
Stock control is a critical business component; without it, unanticipated needs may result in revenue loss.
Keeping accurate inventory data allows for precise forecasting of stock needs and efficient stock control.
Precise inventory figures, such as bestseller lists, storage prices, inbound and outgoing stock, and seasonal figures, strengthen your ability to manage stock control effectively. Effective stock control methods allow your organization to plan for unforeseen circumstances.
The unsold inventory indicates that your company has spent capital that the company can spend elsewhere. Deadstock means that your stock control method needs to be improved, whether the money could be used to purchase more popular items or to invest in new machinery. Effective stock management methods use historical data to determine optimal figures when buying stock, ensuring that capital is spent wisely.
Stockouts are caused by a lack of anticipation and result in poor customer experiences when a given stock item runs out. Forecasting should be refined using an effective stock control method. It is paramount to maintain ideal levels of stock. Too much inventory depletes capital, while too little jeopardizes revenue.
Identifying slow-moving products may be more difficult without a stock control method.
With proper inventory management, your stock is a collection of unsold assets once sold. You lose money when your stock does not sell or needs more. When inventory sits, it depletes resources.
Efficient stock management entails keeping the proper inventory levels in your business and selling the correct levels. When this occurs, you have more capital to invest elsewhere, maximizing your cash flow.
Maintaining adequate inventory levels fosters customer trust and satisfaction. Customers who come to you for a product or service want to know you will have what they require.
Poor stock control management may result in inventory falling below the minimum, resulting in a stockout and revenue loss. Customer satisfaction is essential to run a smooth business.
Various methods can be used to predict future market demand accurately. Using a recommended practice, you can help lead your company to a more profitable position.
JIT is intended to reduce stock carrying costs and waste and increase efficiency.
While this method can increase cash flow and lower storage costs, the demand forecast must be accurate, or the result could be a stockout or lost revenue.
The FIFO principle states that the first inventory acquired is the first inventory sold. The FIFO method has advantages, such as simple calculations to determine the costs and value of stock despite price changes. In addition, the products with the oldest receiving date are chosen and sold first.
Most businesses want to keep their inventory optimally while minimizing costs and maximizing warehouse space. The EOQ method was developed to identify the optimal list. Ordering mindfully allows you to avoid stockouts and keep track of your safety stock levels. You’ll need your holding costs, annual demand, and order cost to calculate your EOQ.
The vendor-managed inventory method, becoming increasingly popular, is a hands-off approach delegated to a third party.
The vendor-managed inventory strategy allows you to pay for inventory only after it has been sold. The company sells its goods but never physically holds stock because the vendor ships the goods directly to the customer Furthermore, the vendor assumes all risks associated with stock management, allowing businesses to operate with less stress.
When a company needs to keep track of each item, the batch control method comes in handy. Each product is typically labelled with an SKU (pronounced “skew”) code.
These codes may include serial numbers or expiration dates, which can be helpful for businesses selling food or medical supplies with expiration dates.
A stock control system includes all the tasks required for adequate inventory and stock management, such as product tracking, turnover rate, shipping and receiving, storage inputs, and reorders.
A stock control system is similar to an inventory management system, and both can be delivered in the following ways:
Some businesses prefer the old-fashioned method of writing everything down on paper. You can track your products using stock books, cards, and spreadsheets. It may work for some businesses and might not work for others as the business grows.
A stock card, also known as a bin card, contains the following:
This system can also track purchases, b returns, and other activities. However, for a stock card system to work, it must be used consistently and updated regularly; otherwise, inaccurate data will cause problems.
Spreadsheets such as Excel can handle large amounts of data without using an automated system. Product data can be captured using a spreadsheet when consistent updates are made. Customization is possible, which can be helpful when integrating coding, high-level macros, or other systems.
Inventory management software is frequently relatively inexpensive for small businesses.
Through stock management software, businesses can track stock counts in real-time, incorporate analytics, run cost comparisons and inventory reports, identify dead stock, and track customer patterns. Furthermore, simple software can often be scaled to include more functionality as your company grows.
Companies can track their inventory using two types of systems: periodic systems and perpetual systems.
Perpetual inventory control systems are frequently more expensive than periodic systems but provide more accurate and up-to-date information.
When you use an automated system, you always know how much stock your inventory has. Perpetual tracking systems are generally superior to periodic systems and are an excellent choice for avoiding stockouts.
While perpetual inventory systems eliminate the need for most manual labor, manual stock counts are still required to ensure accuracy.
Because it does not require intelligent software or scanning, the periodic inventory system is used by many small businesses.
While this system may appear more straightforward because it does not require consistent record-keeping, regular inventory counts are necessary to track inventory. When physically counting inventory, a business may need to postpone all regular duties.
Some businesses need help understanding how to manage stock control. Several factors contribute to an efficient process, but you can get started with the following pointers.
Stock control refers to various aspects of inventory management, one of which is your minimum stock control levels.
Having a precise number of items you must keep in your inventory at all times allows you to see when to order more with certainty. Automating your purchasing process can help free you up for more critical tasks.
ABC analysis is a technique for categorizing inventory. Picking, packing, and tracking become easier by arranging products to create a tier of the most important to most miniature essential items.
A-level products, for example, are the most important and must be replenished regularly. B-level items are medium-value stock that must be reordered periodically. Finally, C-level inventory is delivered via minimal ordering.
The efficient use of warehouse storage is beneficial to operations. Effective inventory management is essential. Effective storage control makes fulfillment more accessible.
Identifying a distinct reordering point Using a reorder point formula ensures you always have enough stock.
Increased demand and market slumps can take you by surprise. Mathematical equations, like a reorder point formula, can help you get your orders right the first time.
Furthermore, effective stock management can help your business and keep you in a good position during difficult economic times.
All businesses require a safety stock. When your inventory runs out, you risk losing customers and revenue. Carrying emergency supplies to cover unexpected events can ensure that you always have products to sell.
Customers dissatisfied with your service may leave if you don’t have a backup plan.
Relationships play an essential role in success of the business. Not only are relationships with customers important, but so are relationships with suppliers.
Paying your invoices promptly and communicating respectfully with your suppliers makes it easy for them to be good to you. When you’re in a difficult situation, a supplier who enjoys working with you is more likely to offer assistance.
Inventory control systems can track large amounts of data, but they are only helpful with analysis. Many systems can generate reports automatically for stock logs, inventory statuses, historical data, and financials, providing insight into your company’s needs.
Sharing these reports with suppliers may also assist your company in acquiring inventory by allowing them to prepare for your requirements.
Any business must deal with risk. Preparing for unforeseen circumstances is critical to success, whether inventory mistakes, a sales spike or cash flow issues. Conducting regular risk assessments to determine worst-case scenarios and planning how to deal with them could save you when they occur.
Accurate stock data is required for a company to remain profitable. Sorting through the numbers to determine what is selling and sitting can aid in reconciling stock and order volumes.
Furthermore, comparing how quickly some items sell versus how slowly others sell can help you identify where changes are to be made, allowing you to make more informed decisions.
Inventory management software can automate time-consuming stock control procedures, allowing you to focus on more critical tasks.
Intelligent software, such as BUSY, ensures that you always have popular items and provides insight into your inventory in ways you might not have noticed otherwise. You can make better decisions if you thoroughly understand your business.
A stock control system must meet the needs of various businesses. Select the best approach for your needs to optimize your inventory management process.
Customer service and success are frequently dependent on real-time inventory tracking. Recognizing how much you have, how much of it you have, and where it is can help you fulfill orders quickly and keep consumers happy.
Inventory is constantly moving in many businesses, and because orders are processed quickly, real-time tracking ensures accurate insight into what’s going on in your business at any given time.
When you don’t have a good handle on your inventory, it can be challenging to know what to buy and when. The intelligent stock control software can assist you in gaining control of your procurement process. Making smarter decisions for your team means understanding your stock. Both its location and value are known.
The intelligent stock control software can automate purchase orders, view transaction history, store supplier discounts, and refund purchase orders for damaged goods.
Effective stock control software should be compatible with your current business processes. Investing in software that interacts with your accounting back end and customer relationship management (CRM) system might be necessary for integrated stock control.
Recognizing what you currently have in stock is vital, but so is knowing how much it is worth. Finance executives must always consider where a company’s value lies.
Inventory management software that accounts for volume, price, and currency variations can aid valuation. Furthermore, the ability to track variables such as courier fees and waste and a live view of your profit margin can provide helpful information.
The innovative stock control software will not only keep track of your inventory but also prevent stockouts in your warehouse. Automatic alerts when stock is low should assist you in quickly creating purchase orders and mitigating losses.
Inventory tracking software should also provide detailed information in an easily digestible report. Administrative tasks are reduced by producing useful reports, providing insight into potential problems, and making operations more efficient. The desirable features are the turnover rate, stock age, unit sales, margins, and backorder rate.
An enterprise’s inventory can only be tracked with software to track multiple warehouses across vast areas. More extensive operations necessitate integrating software that can operate over long distances.
Different KPIs can provide helpful information. Here are a few more popular ones for inventory management and stock control.
The stock-to-sales ratio compares the amount of inventory on hand to the number of sales. The calculation can be used to adjust the stock to maintain higher margins.
The sell-through rate compares inventory sold and inventory received from a manufacturer to assess supply chain efficiency.
The average inventory figure is derived from the company’s amount of stock over a given period. Businesses should strive to maintain a consistent average inventory figure over a year.
The backorder rate is the number of orders a company cannot fulfil when an order is placed, indicating how well a company stocks its popular products.
The inventory turnover ratio, commonly known as the stock turnover rate, measures how frequently a corporation sells and replaces inventory in a particular period. The formula is used to calculate the amount of stock that the company is selling.
The lost sales ratio compares the days a product is out of stock to the expected sales rate, indicating when a company is understocking a product.
Inventory reduction is the amount of product a company should have in stock but cannot account for due to theft, miscounts, damage, or fraud.
Carrying costs, also known as holding costs, are the percentage of value a company pays to keep inventory in storage, including rent and labor.
BUSY is a simple, yet powerful GST / VAT compliant Business Accounting Software that has everything you need to grow your business.