Inventory Management Risks: How They Affect Your Business

December 1, 2021Inventory

Businesses make significant investments into their inventory to keep the engine of their business running.

However, holding inventory comes with risks and these risks can negatively affect your company’s operations, customer satisfaction and even your bottom line.

Business owners must invest time and energy into reducing the risks associated with carrying inventory stock.

1: Inaccurate Forecasting

Achieving an accurate financial and ordering forecast is essential. Selling the right products at the right time of year makes for a more profitable business.

However, if your forecasting is not accurate you can risk underestimating your stock levels which results in stock-outs, lost sales and in some cases, lost customers.

Overestimating is a risk as well, as this may leave you with excess stock that ties up your cash flow and is at risk of wasted stock if you deal with perishables.

By improving your forecasting you eliminate these risks. Looking into systems such as DEAR and Unleashed can make all the difference for your business forecasting.

2: Product Expirations

If you sell perishable goods your inventory management strategy needs to be on point.

The shorter your product’s lifespan, the more of a risk you face.

Businesses that are in the food and beverage, supplements and perishable cosmetics sector need to take a minimal stocking approach.

Stock monitoring and rotation will help you send out older stock before it expires. rotating spot checks should be frequently undertaken for your best-selling products and your high-end items.

3: Unreliable Suppliers

The impact of unreliable suppliers can greatly affect your operations.

The failure to meet delivery schedules or quality standards can lead to production delays, inventory stockouts and unhappy customers.

A good supplier relationship is absolutely essential for minimising your inventory risk. If you are not satisfied with your supplier’s delivery times or consistency in quality. Look at changing your supply source.

4: Loss

Your inventory is an asset to your business. Every time an item of your inventory is lost you have to write off that asset. Writing off inventory stock reduces assets and equity as a result.

Most inventory is lost through poor inventory control or mishandling by employees.

An inventory management system can keep track of your stock and help identify where this loss happens.

Using an inventory management system with PencilPay

To mitigate risk, using software to manage inventory can make all the difference, especially when paired with PencilPay.

PencilPay integrates with inventory management software companies to help you not only save time with data entry but also secure a payment method from your customer to give your inventory business the security it needs to keep providing goods on payment terms.

If you want more information, book a call with us today on the calendar below.