How can my business avoid costly inventory problems?

How you manage inventory can significantly impact your success. Proper methods and techniques will allow you to forecast supply and demand, ensure accuracy of deliveries and shipments and reduce costs and headaches related to over- and under-stocking.

Here are three common errors and ways to combat them.

Mistake #1: Manual or no inventory tracking.

A recent study found that 43% of small businesses don’t track their inventory or use manual processes. This can result in inaccurate counts and second-guessing.

Solution: Automated inventory management systems make it easy to track goods from initial order to final sale. By giving you a snapshot of your inventory in real-time, these systems help you know what to order and when. Modern point-of-sale systems, such as Clover, can help you track inventory automatically.

Mistake #2: Inventory waste.

Some products sit on shelves after they have expired, gone out of style or are no longer in-season. “Dead” stock pushed to the back of shelves can be costly, resulting in added storage expenses, space issues and lost profits.

Solution: The First-In/First-Out inventory method is one way to combat inventory waste. With this approach, the stock you receive first (first-in), rather than your newest stock, is sold first (first-out). To further reduce excess inventory, think outside the box. In addition to selling products at a discount, consider bundling multiple products together as a unit, using them to create new products or trading stock with competitors. If you are in a position to donate your goods or services, you can help others while also possibly benefitting from a tax write-off.*

Mistake #3: Inaccurate forecasting.

Whether you have too much inventory or too little, the problem is often traced to inadequate forecasting. Some businesses lose customers because they can’t identify consumer and sales trends in time to make adjustments.

Solution: Improved market intelligence, combined with a reliable inventory management system, can help you match your supply with customer demand. That requires knowing production lead times and how to identify reorder points. Inventory management systems can significantly improve forecasting and stave off cash flow droughts.

THE BOTTOM LINE: Maintaining enough – but not too much – inventory is critical. Strong inventory management not only saves money, but can also help increase sales and build a stronger brand.

* Consult your tax advisor