What is the real truth about Inventory? It’s a common issue that many businesses forget about, simply because they don’t understand the importance of recording data.
How fast do you think a business can lose a $1,000? A day, a week, a month, most definitely a year! Every business at some point in time has lost money on their inventory, be it from not invoicing a customer properly for the time spent working on their issue, to simply wasting and not recording everything that happens to the stock items. If you’re reading this now and thinking to yourself, “My business hasn’t lost anything”, you’re wrong. Now, it’s not your fault, but let’s take a look at where you might be making some mistakes.
Taking care of your inventory is not hard, it’s basically just controlling your stock items and getting the most value from them when you sell them.
Here’s some questions for you:
- Do you even sell all of them?
- What happens to stock that has been damaged, either on arrival or while it’s in your warehouse?
- Who’s in charge of recording any wastage or writing off stock?
- Can staff members use or consume your product as part of their job?
An important point to note here is, there’s no right or wrong answer to any of these questions. Every business is different and that means the requirements for each will be different too. Consider this, imagine a business of 15 staff where you sell cans of Coke for $3 to customers, but each staff member is allowed 1 can for free each shift that they work. How is that can of coke recorded as no longer an inventory item, and therefore, cannot be sold? Some quick calculations add up fast.
Let’s say the can of Coke costs the business 0.73c. If every staff member has a can for each shift, over a 5 day work week, that’s equal to (0.73 x 15) x 5 = $54.75 a week. In only 19 weeks, and just from cans of Coke, this business gives away $1,000. Not only that, but they lose over $3,234.75 in potential profit, so they are down in revenue over $4,000, and that’s the real truth about inventory and saving money!
If you don’t know where your products are going in your business and why, how do you know how much money you are losing? This particular business might record the cans of Coke and consider it a small expense to pay to keeps staff morale happy. That’s fine, but the cans still need to be recorded. This can be done by writing the stock off as wastage, so that when you perform a stocktake, you can be aware of any variances that affect the value of your business inventory. Now, it’s an easy example to think of a can of Coke, but what does your business stock as inventory? I’m willing to bet that it probably costs you more than 0.73c.
More than just staff taking stock for personal use and not recording it though is wastage. If you’re a manufacturer and you produce products either custom-made to order or provide a standard set of products, you will have wastage. Whatever you produce, there is at some point bound to be a loss of product profit due to wastage. Maybe it’s 10cm cut off the end of some timber, plastic run-off that needs to be trimmed or a metal tube that needed grinding. Each of these products produce waste that should be factored into when working out the profit of a product. Manufacturers will make the same item again and again, and that wastage will add up fast. You might not be able to re-use that wasted item that was cut off, but you can account for it.
Accentis Enterprise is designed with this in mind, and counters for this by allowing you to record any wastage during production, and provides a robust stock control system to ensure that what you hold as inventory, is sold as inventory. It’s easy for any business to lose inventory stock through bad stock control, but by improving your processes and data accountability, you can also improve your business overall. Now that you’ve had some time to think, where are you losing money in your business?
Get in contact with us and we’ll help you to see the real truth about inventory in your data.