American revolutionary Benjamin Franklin famously noted that if you fail to plan you are planning to fail, and nowhere has this quote proved more relevant than for small business operators.
Poor inventory management is behind the demise of many Australian businesses where a failure to keep an eye on internal controls and poor record keeping has led to an over- or undersupply of stock, a loss of financial control and ultimately a diminished customer base.
So what are the steps you should take in ensuring you have control over the stock your business holds?
Determine what kind of system is right for you
According to The Department of Industry, Innovation and Science there are two main types of inventory systems that you can choose for your business: either a periodic or perpetual inventory system.
In a periodic inventory system, you don’t update your inventory records straight after your inventory levels change. Instead, you update them from time to time by physically counting your inventory – doing a stock take. This is often recorded manually via spreadsheets or on paper.
In a perpetual inventory system, you update your inventory records straight away after your inventory levels change. Perpetual inventory systems are often electronic and use a point-of-sale system.
Select the right hardware
An important part of good inventory management is selecting the right tools to balance your labour and infrastructure costs. This is where the use of servers, desktops, scannable bar code label printers, point of sale devices and other tools can work together to assist you to form an accurate picture of the value of the assets carried by your business.
No system can be 100 per cent accurate, particularly when there is a chance of human or technical error.
Integrate your systems
Having to repeatedly enter the same sales information into several different systems will drive you and your staff around the twist. Therefore, it makes sense to ensure your systems are integrated.
New Zealand-based accounting software provider Xero says the best software systems allow you to not only put a sale through your e-commerce system, but will track it via your point-of-sale system, record it in your accounts and log it in your inventory control system in one simple move, saving you both time and money.
No system can be 100 per cent accurate, particularly when there is a chance of human or technical error. For this reason, professional accounting body CPA Australia suggests small businesses undertake a review of stock balances via a physical stock take every six months to ensure an accurate measurement of existing inventory.
To properly forecast demand for your product or service, most financial advisors suggest using some kind of analysis tool to track such things as the type and time of your sales. This assists small businesses to take on board all factors affecting demand while predictive analytics technology will allow you to improve demand forecast accuracy and allow for better allocation and replenishment strategies.
Tracey Porter is a career journalist whose mug shot appears everywhere from daily newspapers and online news sites to business and consumer magazine titles.