Inventory in any business that sells a physical product can be a management nightmare and cause costly inventory mistakes, especially if the inventory is accessible by multiple people. What can seem as a small loss to the company at the time, can add up quickly and cost the company more than just a few dollars, but eat away at any profit the company wants to make. It’s a factor of simple mathematics and data recording, and if you don’t know where your inventory is or how much you have, you’re in the dark.
Shrinkage in a business affects profit in a big way. Not only have you had to pay for the product that you can’t sell, but you also lose the profit on that product you no longer have. Shrinkage can happen within a business due to factors with or without the businesses knowledge, and herein lies the issue. It’s the loss of product that the business doesn’t have control over that causes the most concern. Inventory loss that occurs without business knowing about it includes theft (both internal and external) and bad data recording practices. Inventory loss that the business should know about includes damaged, promotional and internal use. It’s important to remember though, that lack of control overall creates costly inventory mistakes.
If you don’t record losses for anything, your stock control is useless and you may as well not bother.
A good inventory system starts when the stock is invoiced to you from a business, and delivered (or drop-shipped) into your stock. It is “on-hand” the entire time it is in your possession until you either sell it, or write it off. If you can’t account for it as a worthwhile loss, your write-off stock will eat into your profit.
Some stock control factors are easy to avoid, whereas others may mean extra training for staff on procedures, and processes in place for when unexpected situations arise. Here’s some questions to ask yourself about your inventory stock control:
- Do you perform regular and thorough stocktakes?
- Who has access to the inventory system and should they be able to adjust it?
- Have you got too much inventory for what you realistically need?
- What happens to stock that you count, but isn’t recorded in your system?
- Are you recording your stock control manually instead of using a software solution?
- Have staff had the correct training on how handle your inventory, and what to do if there’s an issue?
In the US alone in 2016, businesses collectively lost nearly $50 billion worth of stock. On average, it was calculated as 1.44% of product lost to shrinkage, which for smaller businesses, can really impact the bottom-line. Is your stock inventory system up to date and are you making any costly inventory mistakes? Why not get in touch with us today to find out how we can help you keep track of your losses, and increase your profits!