Inventory typically represents 45-90% of all expenses for a business. It is critical to the accounting process and to the health of your business overall that you employ proper inventory control to protect your precious capital.
Inventory control systems can range from simple physical counting and paper tracking methods to technological barcode scanning and computer tracking methods. While the investment in the more technological systems can help you to realize a significant time and cost savings over the long term, a rudimentary system is fine for getting started.
Following are a few tips to help you manage an effective inventory control system:
Make sure there are regularly scheduled counts
With regularly scheduled counts, you are more likely to catch errors or miscounts in the various stages of the inventory life cycle (raw materials, in-process goods, finished goods). This objective practice becomes a check and balance for both the individual components and final product.
Allow for business cycles
If your business is like most, you will experience seasonal cycles that might require more frequent counts to ensure accuracy and adequate inventory. It’s important to include these considerations when planning and developing your inventory control system.
Make sure price books are organized and update to date
With easy access to accurate and complete pricing information, more effective business decisions can be made regarding overall pricing strategies, and markdowns/markups.
Make sure there is a solid return process
Returned goods must be properly accounted for and valued, with complete records indicating amounts, dates and reasons for returns. This information is helpful in control debits, credits and quality issues.
Consider alternative recording methods
If your inventory consists of thousands of individual finished items, you may want to consider using a dollar inventory record, which provides a rough idea of the overall value of the items on a regular basis.
Consider employing a 3rd party inventory control firm
Depending on the size and maturity of your business, it might be a good idea to consider bringing in the impartial and streamlined operation of a company that specializes in inventory control. Even if used as a temporary or transitional measure to acquire best practices and properly allocate resources, this can be a very helpful solution to your inventory control.
Good inventory control can help balance stock, reduce expenses, determine the best rate of turnover for each item and maintain a solid business reputation for product availability and delivery.
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