Inventory changes constantly. Throughout each day, sales, returns, new receipts—even damage and theft—affect your stock levels. While daunting, keeping track of it all in real time is one of the most important jobs in a successful retail or wholesale business. Check out the top 10 reasons careful inventory tracking—the underpinning for the rest of your business—needs to be a top priority.
1. Fewer missed sales.
When you don’t keep an accurate inventory report, it’s easy to run out of products—and miss out on sales. Instead of relying on your memory or a visit to the warehouse to decide what to reorder, use an up-to-date stock report to:
Quickly see what products you’re running low on
Compare your stock level with what’s been selling well
Place reorders before you run out
Depending on what inventory software you use, you also might be able to set minimum stock levels for each item. Then you can view the list of products that are below that level and place and send new purchase orders quickly.
2. Better-invested cash.
To be successful in retail, you need to invest your cash wisely by buying the right quantity of each product—enough to keep sales going and prevent stock-outs, but not so many that some just sit on the shelf. Keeping accurate inventory reports helps. You can quickly identify slow-moving products, so you can mark them down and clear them out—to free up cash to invest in new products, marketing, and more.
3. More accurate reports.
Accurate stock reports produce accurate stock cost values—which are essential to the precision of several financial reports if you use Cost of Sale accounting. This method associates a cost, which comes directly from the product’s asset value, with each sale. That makes correct cost values critical to your Balance Sheet as well as your Cost of Sales and Profit and Loss reports—on which many management decisions hinge.
4. Early problem-detection.
If you’re keeping an eagle eye on your inventory levels, you’ll spot problems right away—instead of months later during annual stock takes when they may have already cost you a lot of money. Maybe a step in your warehouse process is being missed or one of your salespeople is making mistakes on sales orders. You need to know now! The best way? By constantly reconciling sales and purchases through a tightly maintained inventory system.
5. Happier customers.
Exact inventory reports also help you provide better customer service. When customers say they haven’t received one of the products they ordered, you need to be able to check your report and confirm that you have one extra in the warehouse. Likewise, if you regularly keep on top of inventory levels, you can identify incorrect shipments sooner. And if your stock system is up to date with purchase orders, you’ll be able to sell customers the products they want because you’ll know more are just about to arrive. This kind of communication encourages your customers to trust you, which in these competitive times, is a valuable asset.
6. Efficient reordering.
Reordering will be fast and easy if your reports tell you what’s in stock. You can work methodically through your product set, making informed buying decisions instead of physically checking your warehouse shelves to write a purchase order. If your reports come from an advanced inventory management system, you also can tell if you already have products on order with a supplier and if your supplier has long lead times or irregular deliveries. This information is a must if you want to keep reordering under control.
7. Theft and loss reduction.
From theft to loss to damage, stock can be lost in many ways. But if you manage accurate stock levels, you can identify it quickly. And while no one wants to think that their staff may steal from them, it pays to be vigilant. Showing your staff that you keep an accurate inventory is a great theft deterrent.
8. Trusted information systems.
Running an efficient and profitable business is all about sharing and using accurate information, usually through an integrated software system. If your staff knows that the stock levels in your system are always up to date, they’ll trust the software and use it more for all of their tasks. You’ll end up with better data for better reporting, collaboration, and efficiency across the team.
9. Reduced warehouse costs.
When your inventory report tells you what you have in stock, the pick-pack-ship process runs more efficiently. Your warehouse staff doesn’t need to run around looking for the last product because you know exactly when it sold and shipped. This enables you to process more orders in the same amount of time with the same staff—or balance your resources differently. Accurate stock levels can keep your business lean! Find out how to optimize your warehouse with Brightpearl here.
10. Stock take and end-of-year efficiency.
When all your inventory levels are up to date all the time, periodic stock takes are faster and more efficient. You’re just confirming data that’s already in your system instead of doing a lot of time-consuming data entry.
For growing retailers—especially those adding locations or channels—inventory management can seem overwhelming. We’re asked about it all the time at Brightpearl. But we hope these 10 reasons illustrate that the efficiencies you’ll gain make it well worth your effort. A little focus on this foundational piece of your business can bring big rewards.
To read more about inventory tracking – Please go to this guide.