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Inventory Management: How Bad Inventory Can Give Your Business a Bad Name
It’s that time of the year when semi-annual sales are in season across the nation, and shoppers who have been stoically holding themselves back for the past six months can finally splurge to their heart’s content. For retailers, there is perhaps no better test for their inventory management system than these crucial periods. Done right, sales are maximized while the costs of carrying excess inventory is reduced. On the contrary, a swollen inventory takes up storage, insurance, and increases the risk of depreciation.
No system is an island
But no matter how efficient your inventory management system is, there can still be the need for many intervention and reconciliation if it’s not integrated with your accounting software and other back-office operations. According to the U.S. Small Business Administration, inventory represents 45 to 90 percent of all small business expenses. In this age of automation, business apps are designed to streamline processes; and the union between inventory and accounting ensures a financial report that matches the physical stock to plan effectively and execute predictably.
No business is immune
No matter how big or small your operation is, no one is invulnerable to the risks of over and understocking. In 2011, Best Buy gave its online customers the worst possible news four days before Christmas. In a issued statement, the electronics retailer said, “Due to overwhelming demand… we have encountered a situation that has affected redemption of some of our customers’ online orders”. Tech Crunch defined the year as “How Best Buy Stole Christmas”.
In 2015, Target pulled out of Canada after two disastrous years, having suffered from poor supply chain management. Goods were coming into the warehouses faster than they were going out, because barcodes for many items did not match what was in the computer system. The final pricetag? $5.4 billion in pre-tax losses. But the greater lesson here is that it was absolutely preventable.
No disappointed customers
In the case of Best Buy and Target, the loss is more than just monetary. Many of those deprived of their Christmas present in 2011 and consumers who visited Targets in the Great White North with poorly stocked shelves will most likely never give either brand a second chance.
A poorly connected inventory management system also makes it hard for your finance team to get a pulse on the business’ inventory health. Without the ability to monitor this aspect of your operation accurately, your will spend your resources looking for mistakes and repairing damaged customer relationships instead.
AccountingSuite’s cloud-based accounting software and online inventory management can track inventory levels, orders, sales and delivers in real time, from anytime and anywhere to ensure that your customers’ orders are fulfilled promptly and correctly, while preventing understocking and lost sales. Don’t let bad inventory control give your business a bad name. Take control today.
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