What is Inventory or what does the word Inventory mean to you? Inventory in very simple terms is the physical (tangible) aspect of doing business. Inventory refers to stock necessary to do business for example if you have a small manufacturing business, your inventory will be made up of the raw materials or components used to assemble your product, any unfinished goods and finished goods. If you run a small trading business such as a retail store then the merchandise stock which you buy to sell makes up your inventory.
In a literal sense, all business activities are centred on stock or Inventory. Therefore the success of your business depends on how well you manage your stocks through a good accounting system for your stock.
Poor Inventory management and accounting system can result in out-of-stocks and over stocks resulting in either loss of sales for your business or stock losses through theft and damages.
Here are the four ways in which you can effectively manage your stocks to grow your small business.
1. Maintain an assortment of the range of products- but not too many. If you run a small home retail shop for instance make sure you stock all necessary stocks to avoid loosing sales.
2. Keep your stocks low but not below the minimum. I earlier stated that stocks represent money in your business so the more stock you keep the more cash gets held up in your business and you may not be able to pay the people you owe promptly in addition, you may incur further costs such as storage costs if you keep too much of stock. However, in trying to keep your stocks low you should not keep them too low to a level where you run out- of -stock because that can mean loss of sales.
3. Make bulk purchases to obtain low prices if you can- but please don’t over buy. This is a very simple principle when you buy in bulk you are able to negotiate with the seller for lower prices through a discount, in turn you can fairly price your products beating the competition.
4. Devise ways and means to dispose of any obsolete and slow moving stocks so that cash is not held up in such stocks.
From the four listed points, you will note that Inventory management whether in a small business or a big business involves two closely related elements. Firstly know what to order and how much to order, when to order and what price to pay. Secondly making sure that the items, once bought into stock are used properly to produce profits and grow your small business.
About the Author:
Fixed Asset Consultant at Prosperity Agencies Limited with over 10 years practical experience in physical verification, bar-coding of assets and fixed asset software implementation +260 211 239859
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