August 17, 2022Inventory
Stocking an inventory of popular goods is an important part of growing your small business.
However, filling up your inventory is only a first step. Some businesses suffer rough times or even go under because they fail to manage their inventory.
Even a hot-selling item might not help you if you lack the inventory management software to properly maintain your supply of products.
Keeping Informed With Inventory Management Software
While it may not seem that investing in inventory software is a worthwhile expense, the truth is that proper inventory management can do a lot to keep your business running efficiently.
Maintaining an inventory involves different considerations that are easy to lose track of. Some business owners incur heavy losses just because they did not know how much of an item they had in stock.
To make good business decisions, you need to have a comprehensive picture of your product inventory. Furthermore, you can use that information to place orders for products buyers want while abstaining from ordering more of an item that does not sell.
To learn what to look for in inventory management software, it may help to understand some common problems entrepreneurs experience with their inventory.
An Excess of Stock
Your main hope is that your goods will sell before too long. However, some businesses order more of a type of product than customers are willing to buy.
Without sales, the overstock just sits in a warehouse, occupying space that a business owner could better fill with products that buyers actually want.
There are certain options available to get rid of excess stock. You could mark down the price to encourage customers to buy.
If the stock still fails to move, you may resort to liquidation. If your overstock is perishable, you will have to find a buyer before these goods spoil. Otherwise, the products will become worthless.
Regardless, utilising any of these choices will probably not be enough to recoup the initial costs of ordering or manufacturing the overstock.
A Product Shortage
The opposite problem of overstocking is not having enough of products that sell. When you experience an item shortage, you cannot fill orders from customers.
This could lead to hurried actions to refill your inventory, which may cause mistakes such as overstocking your products. Also, if you cannot keep an item in stock, you may lose customer goodwill as your buyers seek out another supplier.
Using Inventory Software To Prevent Problems
The important benefit of investment management software is that it organises and centralises your inventory data.
In addition, it provides you with analysis of your product supply as needed. A strong inventory management system should give you the following information:
- Products currently in stock: You do not have to risk running out of items since you know how much you have and when to order an item with depleted stock.
- Product sales: You will know how much of an item is selling and which products are lagging. This permits you to change marketing strategies to move non-selling items and prioritise the sale of a hot product.
- A sales forecast: Your software can analyse your past sales and project future sales. A computer projection helps you know which products to invest in going forward.
Taking Actions To Cut Business Costs
Making good decisions to stock your inventory might not turn out as well as you hope if your business loses money in other areas.
Even strong profits on sales could amount to little if your business is spending too much on labour or redundant activities. Effective inventory management software should allow you to consider the following cost-saving actions.
1. Cut Down on Overhead
Your overhead is one area that might be costing you a lot of money.
While overhead expenses do not have a direct connection to creating your goods or services, they are still important to maintaining your business.
Common examples include property expenses, advertisement costs, office materials, and utility services.
You want to avoid excessive overhead if possible. You could accumulate overhead costs by keeping up inventory systems that are old and inefficient.
Having updated inventory software in place frees you to divert money from overhead to operations that will play a direct role in boosting your profits.
2. Reduce Your Labour Needs
An efficient inventory management system helps your business avoid mistakes or gaps in information that could necessitate diverting your workers to tasks that take up time and money.
For example, you may have misplaced a specific item and have to ask a worker to go into the warehouse to track it down. If your inventory management software tells you where the item is, sending a worker is unnecessary.
Assigning your workers to fill out forms and manually enter inventory data into your computers can also count as an unnecessary expense.
Updated inventory software automates some of these tasks, letting you devote your labour force to tasks that are more likely to generate profits. The automation may even allow you to scale back work hours or eliminate redundant positions.
3. Minimise Product Returns
You hope that your customers will feel satisfied with your products.
In the event a buyer has a problem with a purchase, you will probably accept the product back and refund the purchase. Still, you want to minimise these returns.
Too many returned products can cause an overstock. Also, if you receive damaged items, you will likely have to reduce the price on a second sale.
Ensuring that your orders remain accurate can help prevent unnecessary returns.
Businesses use inventory management software to eliminate errors in sending addresses and make sure product names are accurate so a buyer does not receive the wrong product.
Making Your Business Efficient With Inventory Management Software
If managing your inventory seems like a daunting task, you do not have to worry.
PencilPay provides a business software platform that is easy for small businesses to use. With the right inventory management software and support, you should feel confident that the best days of your business lie ahead.
Check out how we provide businesses with up-to-date inventory management services.