How to manage small business inventory
One of the most crucial functions of business finances is inventory management. However, if you are a small business owner you may not realize how important the management of your inventory is. Small business owners often think that because they typically carry smaller inventories that managing it is less important. This is a mistake. All business owners of every size of business need to be vigilant about staying on top of their inventory and managing it effectively. Failing to do this can often cause serious financial problems for any business that cannot be recovered from. Here is what you need to know about how to manage small business inventory-
- Understand what your inventory really is-It is important if you are asmall business owner that you understand what your inventory really is. Your small business inventory is cash that could be used somewhere else in your small business. That means that you must be vigilant in managing your inventory so that you don't have cash tied up that you may need somewhere else in your small business. Keep in mind that if you have too much inventory then you are not only wasting your cash on holding that inventory but on the care of it and possibly the storage, as well. Conversely, if you don't have enough inventory you could be causing serious damage to the financial health of your small business.
- Always be watching the movement of your inventory-Savvy small business owners are always watching the movement of their inventory. You want to make sure that you are not stuck with inventory that is not moving. Inventory usually goes into a slow moving category before it becomes obsolete so it is crucial that you keep accurate records for inventory management and catch inventory when it starts to slow down. This way you can find ways that will help you move the inventory before it becomes obsolete and almost worthless to the bottom line of your small business. If you find that you have obsolete inventory you will need to take steps that will help you to quickly move it and get at least something from it. However, you want to avoid this situation at all costs.
- Reorder when it really is necessary-Another common inventory management problem has to do with when to reorder. You want to make sure that you are reordering inventory only when you need it. Then once you reorder you should take into account the shipping and delivery times. Inventory analysts call this safety stock. You want to make sure that you have always have enough inventory to stay in business and not jeopardize sales without holding to much inventory. There are programs that can help you establish the right reorder point for your small business.
- Use technology for inventory management-Today, there is no need to manage your inventory with manual means. Most business accounting software has a inventory management function. This will allow you to control and manage your inventory easily and effectively. Many small business owners are worried that they will have to buy too much accounting software for the size of their business. The good news is that most accounting software comes in expandable components that allow you to buy what you need now and then add to it as time goes on. This means that you can buy the inventory management software that you need now and as your small business grows you can add the software that you need to help manage it. By using this type of accounting software you can always be aware of exactly what is happening with your inventory with only a few clicks.